World’s central banks stay cautious with Q4 right around corner

ISTANBUL

Central banks worldwide maintain their cautious stance as they prepare to enter the fourth quarter of the year, amid the global fight against inflation and the US’ protectionist policy stance.

Tariff-induced concerns over price increases in the US led to worries that inflationary pressures could intensify, which fuel further uncertainty.

The US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BoJ), the Reserve Bank of New Zealand (RBNZ), and Türkiye’s Central Bank will make monetary decisions in October.

The Fed cut its policy rate for the first time this year, reducing it by 25 basis points to the range of 4 to 4.25% in September, within estimates. Fed Chair Jerome Powell said that the balance of risks shifted with the rise of downside risks to employment, though it did not warrant a 50-basis-point cut.

Signals to be received from US employment and inflation data, which will be released next month, will be decisive in the Fed’s monetary policy decision on Oct. 29.

The Fed is expected to cut rates by 25 basis points in October, while the market expects two cuts of 25 basis points each in total by the end of the year. Analysts say that as risks to employment decrease, the Fed may skip October or December to cut rates.

Meanwhile, the BoJ maintained its policy rate unchanged at 0.5% this month and it is expected to maintain it at its October meeting, while increasing rates by 25 basis points by the end of the year.

The Bank of Korea kept its rate unchanged at 2.5% in August, within estimates, due to limited improvements in the country’s economy and tariff-induced uncertainties over its growth outlook. It will make a monetary policy decision on Oct. 23, though predictions are unclear.

The RBNZ, on the other hand, is certain to cut rates by 25 basis points on Oct. 8.

At the same time, all eyes turn to the ECB’s rate decision. The ECB maintained its three key policies at its latest meeting on Sept. 11, within expectations, as the eurozone’s medium-term inflation was near the 2% target.

The ECB cut its three key policy rates by 100 basis points this year before pausing its rate cut cycle in July. Consumer inflation in August was below estimates, at 2% on an annual basis.

ECB officials signal that there may not be more easing of monetary policy, and market estimates reflect that as the bank is not expected to change its three key policy rates on Oct. 30.

In Türkiye, the country’s Central Bank cut its policy rate by 250 basis points to 40.5% in September. The bank also lowered its overnight lending rate from 46% to 43.5% and the overnight borrowing rate from 41.5% to 39%.

Slowing inflation in August and better-than-expected growth in the second quarter led to the cuts, while the country’s domestic demand remained weak.

The Turkish Central Bank will make its monetary policy decision on Oct. 23.