Review of “Super Central Bank Week”: Japan Exits Negative Interest Rates, Switzerland Unexpectedly Lowers Interest Rates

This week (March 18-March 22), Global welcomed the most important “Super Central Bank Week” of the year. The central banks of 11 major economies, including the United States, Japan, Britain, Brazil, Russia, Mexico, Australia, Indonesia, Türkiye, Switzerland and Norway, have announced interest rate decisions. Except for Norway, the other ten countries are all ranked in the top 20 of global GDP.
Among the 11 central banks, 2 have raised interest rates, 3 have lowered interest rates, and 6 have remained unchanged. Except for Switzerland’s unexpected interest rate cut, all other central bank interest rate decisions are in line with mall expectations.

The Bank of Australia was the first to exit. On the morning of March 19th Beijing time, the Reserve Bank of Australia announced that it would prop up its benchmark interest rate at a 12-year high of 4.35%, but it will no longer mention the possibility of further interest rate hikes, indicating that the currency compression cycle has come to an end. The Bank of Australia speculates that the country’s inflation rate will return to the target range of 2% -3% by 2025. Analysts estimate that the Bank of Australia will be able to cut interest rates starting from September, with a maximum of two cuts of 25 basis points each time within the year.
Following closely behind is the Bank of Japan, the last major country in the world to implement a rate back strategy, and its intentions are closely monitored. On the noon of Beijing time on the 19th, Bank of Japan announced a 10 basis point increase in its short-term strategy interest rate to 0%, while also withdrawing from the Yield Curve Mastery (YCC) strategy, the Run Buy Japanese Stock Trading Fund (ETF), and the Real Estate Investment Trust Fund. This is the first time Japan has raised interest rates since 2007, which also means that the country has bid farewell to the eight year long period of interest rate hikes.
Economists generally believe that there is limited space for Japan to inherit and improve its monetary strategy. On the one hand, the domestic inflation pressure in Japan is relatively mild. After stopping in January, the year-on-year growth rate of the Consumer Price Index (CPI) and the focus CPI growth rate, which excludes food and fuel prices, have fallen to 2.2% and 2.0% respectively, approaching the Bank of Japan’s inflation target of 2%. Although the subsequent decrease in salary growth rate can improve inflation resilience, overall, Japan is still in a benign inflation range and will not miss the malignant inflation risks faced by the United States and Europe in 2022.
Secondly, the sustainability of Japan’s economic recovery needs to be confirmed. Economists point out that Japan’s current output is still lower than its potential output, and Japan is also facing tight fiscal pressure in 2024. The Ministry of Finance speculates that the deficit rate will fall below 2% in 2024, which will have a significant impact on Japan’s economic growth this year. In addition, the high leverage ratio of the Japanese authorities subjectively limits the space for the Bank of Japan to significantly tighten its monetary strategy.
On Wednesday, Beijing Time, two central banks announced interest rate decisions, namely Indonesia, the largest economy in Southeast Asia, and Brazil, the largest economy in South America.
The Bank of Indonesia has kept the benchmark interest rate pillar unchanged at 6% as scheduled, in order to stabilize the Indonesian rupiah as a pillar. So far this year, the Indonesian rupiah has risen by about 2% against the US dollar.
On the other side of the world, the Brazilian central bank announced a 0.5 percentage point reduction in its benchmark interest rate to 10.75%, marking the sixth time since August last year that the Brazilian central bank has lowered its strategic interest rate. Brazilian media believe that the rate cut this time is in line with the expectations of shopping malls, and the Brazilian central bank hopes to comfort consumption and investment, and promote sufficient employment. The weak recovery of the Mongolian Huanqiu economy has had a negative impact on the Brazilian economy due to the previous low commodity prices.
On the 21st (Thursday) of Beijing Time, five central banks announced interest rate decisions, namely, the United States, Switzerland, Türkiye, Norway and the United Kingdom.
The most cherished is the world’s largest central bank, the Federal Reserve. Not surprisingly, at the interest rate rally that ended in the early hours of Beijing time on the 21st, the Federal Reserve Commission announced that the federal funds rate range would remain unchanged at 5.25% -5.5%. From March 2022 to July 2023, the Federal Reserve raised interest rates 11 times in a row, with a cumulative increase of 525 basis points, the most aggressive in 40 years.
The latest interest rate roadmap of the Federal Reserve shows that Federal Reserve officials estimate to cut interest rates three times by the end of this year, an increase of one compared to the end of last year. Under the expectation of interest rate cuts, all three major US stock indexes hit new opening highs on the same day (Wednesday Eastern Time), with spot gold breaking through $2200 per ounce, breaking historical records.
Norway and the United Kingdom remained motionless. The Norwegian intermediary bank announced that the benchmark interest rate pillar will remain unchanged at 4.50%, and stated that it is necessary to expect at least six months before any expected easing strategy can be achieved. Analysts point out that the potential inflation rate in Norway for February has dropped to the lowest level in 18 months, but due to better than expected economic performance, the labor market remains tight, and a new round of labor management talks can raise wage levels, there is not much pressure for the central bank to shift towards a more relaxed strategy.
The Bank of England has set its benchmark interest rate at 5.25%, which is also in line with market expectations. The UK Monetary Strategy Committee believes that the current inflation target is still at a high level and that it is necessary to maintain a tight strategic attitude for a sufficient period of time. From November 2021 to August 2023, the Bank of England has raised interest rates 14 times in a row, and the current benchmark interest rate of 5.25% is the highest since April 2008. Under the high interest rate strategy, inflation in the UK has gradually decreased, with the year-on-year increase in CPI in February this year dropping to 3.4%, a decrease of 3.3 percentage points from August last year, but still exceeding the Bank of England’s inflation target of 2%. However, Bank of England Governor Andrew Bailey previously stated that interest rates do not need to be lowered after inflation reaches its target level. The mall estimates that the Bank of England can announce a rate cut as early as June this year.
Türkiye’s intermediary bank announced an interest rate increase of 500 basis points, floating the benchmark interest rate from 45% to 50%. Türkiye’s Monetary Strategy Committee said in its statement that the progressive strategic interest rate is to cope with the improvement of inflation prospects. To curb inflation, from June 2023 to January this year, Türkiye’s central bank has increased interest rates for eight consecutive times, and the strategic interest rate has risen from 8.5% to 45%. In February, the Central Bank of Türkiye stopped and increased interest rates. However, the latest data shows that in February, Türkiye’s CPI soared to 67.1% year-on-year, a 15 month high, forcing Türkiye’s central bank to tighten its monetary strategy again.
The accident of the day came from the Swiss Central Bank. The Swiss National Bank announced a 25 basis point reduction in its key strategy interest rate to 1.5%, becoming the first developed country to cut interest rates in 2024. The consequences of the Swiss central bank’s anti inflation rest in the past two and a half years have been significant, with the CPI increasing by 0.6% year-on-year in February, a decrease of 2.8 percentage points from the same period last year. The Swiss central bank has shown that it is estimated that the inflation rate will remain in the target range of 0-2% in the coming years. Lowering the strategic interest rate not only considers the reduction of inflationary pressure, but also provides support for economic movements.
On the early morning of Friday, Beijing time, another important Latin American economy, Mexico, announced a rate cut from 11.25% to 11.00%, marking the first rate cut by the Mexican central bank since the start of the rate hike cycle in June 2021. In a notice released on the same day, the Bank of Mexico stated that the country’s inflation level is unlikely to continue to decline, but given the current economic risks and provocations, it will continue to cautiously integrate its currency strategy. From June 2021 to March 2023, the Mexican central bank raised interest rates 15 times in a row, raising the benchmark rate from 4% to 11.25%.
The last person to leave this Super Central Bank Week is Russia. On the evening of Beijing time on the 22nd, the Intermediate Bank of the Russian Federation announced that the key interest rate pillar would remain unchanged at 16%. The Russian central bank has shown that inflationary pressure is weakening, but the level of inflation remains high.