Signs of slowing inflation are becoming more apparent, creating conditions for a collective shift in global central bank monetary policy in June.
Analysts at Morgan Stanley, led by Nora Szentivanyi, released a report this week stating that while inflation levels remain relatively high, developed economies are showing clear signs of a slowdown.
Considering that the Swiss National Bank and the Swedish Riksbank have already cut interest rates, Morgan Stanley expects the Bank of Canada and the European Central Bank to follow suit in June. Morgan Stanley wrote:
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Canada's inflation rate dropped to 2.7% in April, in line with our expectations. The three core indicators closely monitored by the Bank of Canada are within target range, averaging 2.75%, the lowest level since July 2021. Core CPI, excluding food and energy, also decreased to 2.7%. We believe these data still support the Bank of Canada's first rate cut at the meeting on June 5.
Following the strong signal of a rate cut in June, the European Central Bank also seems prepared to take action next month. The rate cut in June seems almost certain, so the new staff forecasts from the European Central Bank may have a greater impact on signals for subsequent meetings. It is expected that the core inflation rate for 2025 will be slightly raised to 2.2%, but inflation in the second half of 2025 will still be maintained at 2%.
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ECB President Lagarde stated on Tuesday that, given the current containment of the rapid rise in consumer prices in the Eurozone, a rate cut in June is highly likely.
While inflation in the UK service sector remains high, Morgan Stanley expects that the CPI data for April will be lower than the Bank of England's forecast. Bank of England Governor Bailey previously stated that the possibility of a rate cut in June is not ruled out, and the rate cut may be larger than market expectations.
In emerging markets, the South Korean economy is accelerating its recovery, and the expectation of slowing inflation and rate cuts may be delayed, with CPI expected to rise to 3.2%, significantly higher than the central bank's target, which may prompt the central bank to maintain a cautious stance. Morgan Stanley reiterated its forecast that the Bank of Korea will make its first rate cut of 25 basis points in the fourth quarter of 2024

JP Morgan expects the Bank of Canada and the European Central Bank to cut interest rates for the first time in June, with the Bank of Korea likely to cut rates in the fourth quarter. Bank of England Governor Bailey previously stated that the possibility of a rate cut in June cannot be ruled out

Global central banks' interest rate cuts, June will be an important turning point