Visualized: Interest Rate Forecasts for Advanced Economies

Visual Capitalist

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May 1, 2024 Article/Editing: Graphics/Design:

Interest Rate Projections for Advanced Economies

While U.S. inflation cooled in the second half of last year, price pressures returned in 2024, leading investors to rethink how soon central bankers will cut rates.

Despite the recent increase, the interest rate forecast for many economies looks optimistic, thanks to subdued energy price shocks and abating supply chain disruptions. Still, short-term risks remain, including persistently high services inflation clouding the outlook.

This graphic shows the interest rate forecast for advanced economies, based on the International Monetary Fund’s (IMF) 2024 World Economic Outlook.

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A Closer Look at the IMF Interest Rate Forecast

Below, we show the projected path of interest rates based on the IMF’s latest data:

Federal ReserveBank of EnglandECBBank of Japan Q1 20245.4%4.0%-0.1%5.3% Q2 20245.3%3.9%0.0%5.3% Q3 20245.0%3.7%0.0%5.0% Q4 20244.7%3.4%0.1%4.8% Q1 20254.5%3.2%0.1%4.5% Q2 20254.3%3.0%0.1%4.3% Q3 20254.1%2.7%0.1%4.0% Q4 20253.9%2.7%0.2%3.8% Q1 20263.7%2.6%0.3%3.5% Q2 20263.5%2.6%0.4%3.5% Q3 20263.3%2.6%0.4%3.5% Q4 20263.1%2.6%0.6%3.5% Q1 20272.9%2.6%0.6%3.5% Q2 20272.9%2.6%0.6%3.5% Q3 20272.9%2.6%0.6%3.5% Q4 20272.9%2.6%0.6%3.5% Q1 20282.9%2.6%0.6%3.5% Q2 20282.9%2.6%0.6%3.5% Q3 20282.9%2.6%0.6%3.5% Q4 20282.9%2.6%0.6%3.5%

As we can see, the U.S. is forecast to see its first rate cut in the second quarter of 2024.

Broadly speaking, rates will be cut very gradually, with two additional rate cuts anticipated for this year. By 2027, interest rates are projected to fall to 2.9% after a series of moderate rate cuts as inflation dissipates.

Like the U.S., the European Central Bank is forecast to cut rates in the second quarter of 2024, with rates set to fall to 2.6% by 2026. While inflation has cooled at a faster rate across Europe compared to the U.S., GDP growth is also projected to be more muted. This year, the IMF projects that

The full article is available here. This article was published at Visual Capitalist.