Central banks eased monetary policy in October

ISTANBUL

Central banks worldwide eased monetary policies in October, responding to inflation concerns, though these efforts were limited.

As economies near the end of a three-year battle with inflation, central banks continue to adjust their policies.

The European Central Bank (ECB) reduced its key policy rates by 25 basis points: the deposit rate to 3.25%, the refinancing rate to 3.40%, and the marginal borrowing rate to 3.65%, in line with expectations.

ECB President Christine Lagarde noted weaker-than-expected economic activity in the eurozone, slow company investments, and declining housing investments.

The Bank of Canada (BoC) cut its policy rate by 50 basis points to 3.75%, easing for the fourth consecutive meeting. The BoC cited that inflation is no longer broad-based and should remain near its target.

South Korea's Bank of Korea (BOK) lowered its policy rate by 25 basis points to 3.25%, marking its first rate cut since 2020. The bank noted slower inflation, decelerating household debt growth, and reduced risks in the foreign exchange market.

Meanwhile, the People’s Bank of China (PBoC) left its main policy rate unchanged, signaling a cautious stance despite other stimulus efforts. The National Interbank Funding Center (NIFC) reduced the one-year Loan Prime Rate (LPR) from 3.35% to 3.10% and the five-year LPR from 3.85% to 3.60%.

The Bank of Japan (BoJ) maintained its short-term interest rate at 0.25%, forecasting continued economic growth and a 2.5% increase in the core Consumer Price Index (CPI) for fiscal 2024.

In contrast, Russia's Central Bank raised its key interest rate by 200 basis points to 21%, its highest ever, citing rising inflation and growing domestic demand outpacing supply.

Türkiye's Central Bank kept its one-week repo rate unchanged at 50%, noting a slight increase in inflation trends and signaling that domestic demand is slowing, with potential disinflation on the horizon.

The Reserve Bank of New Zealand reduced its policy rate by 50 basis points to 4.75%, its second rate cut in 2024.

Other central banks, including those of Hungary, Poland, and India, kept their policy rates unchanged at 6.50%, 5.75%, and 6.50%, respectively.

*Writing by Emir Yildirim