Avobis: Outlook on the Interest Rate Market October 2024 – Which Monetary Policy Steps Are to Be Expected?

Introduction

The financial markets are currently in a state of flux, with interest rates rising and inflation remaining high. This has led to much uncertainty among investors, who are unsure of how to position their portfolios. In this article, we will provide an outlook on the interest rate market for October 2024, and discuss which monetary policy steps are likely to be taken by the central banks.

Current State of the Interest Rate Market

The interest rate market has been on a roller coaster ride in recent months. In early 2023, interest rates began to rise sharply as the central banks tightened their monetary policy in an effort to combat inflation. This led to a sell-off in the bond market, as investors dumped bonds in favor of safer assets. However, in recent weeks, interest rates have started to stabilize, and the bond market has begun to recover.

The current yield curve is upward sloping, meaning that long-term interest rates are higher than short-term interest rates. This is a sign that the market expects inflation to remain elevated in the future. However, the yield curve is not as steep as it was earlier in the year, which suggests that the market is becoming less concerned about the risk of runaway inflation.

Outlook for the Interest Rate Market

We believe that the interest rate market will continue to be volatile in the coming months. However, we expect that interest rates will eventually stabilize, and that the yield curve will flatten. This is because we believe that the central banks will be successful in bringing inflation under control without causing a recession.

We believe that the following monetary policy steps are likely to be taken by the central banks in the coming months:

• The Federal Reserve will continue to raise interest rates, but at a slower pace than in the first half of 2023.
• The European Central Bank will raise interest rates for the first time in over a decade.
• The Bank of Japan will keep interest rates on hold, but will signal that it is willing to raise rates if inflation continues to rise.

Conclusion

The interest rate market is likely to remain volatile in the coming months. However, we believe that interest rates will eventually stabilize, and that the yield curve will flatten. We believe that the central banks will be successful in bringing inflation under control without causing a recession.