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Inflation has fallen in most developed nations, and central bank officials are now trying to steer their economies toward a so-called soft landing.
- Sept. 18, 2024, 12:00 p.m. ET
After months of divergence, the Federal Reserve is expected on Wednesday to join other major central banks in cutting interest rates.
Across Europe, central bankers have already begun the process of easing up on the aggressive stances they took in recent years to quell high inflation. Policymakers have lowered inflation within sight of their targets and are now trying to delicately steer their economies toward a so-called soft landing. They want to avoid keeping rates too high for too long and causing excessive damage, such as a jump in unemployment, to economies that have already been weakened by high interest rates.
Still, these officials have been wary of declaring victory too early. With stubbornly high inflation in the services sector and relatively strong wage growth, they have lowered interest rates slowly. Last week, the European Central Bank cut rates for the second time in three months and traders expect officials in the eurozone to wait until December before lowering rates again.
On Wednesday, inflation in Britain held at 2.2 percent in August, but policymakers at the Bank of England are expected to keep rates steady this week, having cut them already last month. Officials in Britain have said inflation has slowed enough to cut rates, which has brought some relief to mortgage holders and companies that need loans, but they are not confident that inflationary pressures have been completely stamped out.
Similarly, central banks in Norway and Sweden are also expected to hold rates at their meetings later in September, as they emphasize their gradual approach. The Swiss National Bank is expected to continue its quarterly interest rate cuts, which it started in March, when its officials meet later this month.
Policymakers “are pretty confident in the direction of travel for rates, that these need to come down, but that they need to be cautious,” said Katharine Neiss, an economist at PGIM Fixed Income, an asset manager.
