Monetary Policies of Central Banks and Economic Developments in the Global Economy

The global economy continues to be shaped by decisions made by central banks regarding monetary policies and economic indicators. Interest rates, economic growth targets, and fiscal stimulus packages are on the agenda in numerous countries, from Australia to Japan and from China to Canada. These developments are influencing market expectations as countries reassess their economic strategies. Decisions made to maintain the balance between growth and inflation are particularly significant for both domestic and international investors.

Australia's central bank keeps interest rates steady The Reserve Bank of Australia maintained interest rates at 4.35%. The bank softened the hawkish tone of its previous statements, indicating it has gained some confidence that inflation is progressing towards the target. As the board removed the statement that the policy should remain restrictive, markets are maintaining expectations of a potential rate cut in the next meeting in February or April. This change in tone has led to a depreciation of the national currency.

Calls for rate hikes from the BOJ increase There are growing calls for the Bank of Japan (BOJ) to raise interest rates promptly to avoid the risk of being late. Hiroshi Yoshikawa, a retired professor from the University of Tokyo, stated that the time for the BOJ to take action has come. He argued that Japan's low interest rate of 0.25% needs to be naturally increased for a significant change in the economy. Expectations continue regarding whether the BOJ will raise interest rates in the coming days.

China's expectations for an additional fiscal package According to Nomura economists, a larger fiscal package may be needed to stimulate China's economy. Experts reported that Beijing needs to improve the real estate market and financial system, as well as repair the social welfare system to alleviate geopolitical tensions for a genuine recovery by 2025. Analysts believe that the GDP growth target for 2025 will be kept around 5%. Various interest rate cuts by the People's Bank of China are expected in the first half of the year, but a significant fiscal package is anticipated to be delayed until the National Development and Reform Commission meeting in March.

Homeownership rate in the UK lags behind income growth According to the Office for National Statistics, the average house price has reached approximately 8.6 times the disposable income of a typical household. This situation indicates that only the highest income bracket can afford to buy homes in the UK. London, in particular, stands out as a city where even those with the highest incomes face prices well above their annual earnings.

Expectations for a rate cut from the Bank of Canada The Bank of Canada is expected to lower interest rates. Economist Larry Berman indicated that there is an 85% probability that the bank will make a 50 basis point cut this week. However, it is predicted that the pace of rate cuts will slow down, with only three more 25 basis point cuts expected in 2025. Berman added that the primary catalysts are the weakening labor market and a resurgence in inflation risks to some extent.