Take two: Fed makes third consecutive rate cut; Eurozone business activity continues to stall
- 23 December 2024 (3 min read)
What do you need to know?
The Federal Reserve (Fed) cut interest rates by 25 basis points (bp) at its latest policy meeting, marking the third consecutive reduction this year and bringing borrowing costs down to between 4.25%-4.50%. The Fed indicated it would slow the pace of easing, now seeing 50bp of cuts in 2025 instead of 100bp. AXA IM expects one more 25bp rate cut in March, with rates then on hold through the rest of 2025. Elsewhere, the Bank of England held rates at 4.75%. Meanwhile US third quarter (Q3) growth was revised to 3.1% annualised, up from the earlier estimate of 2.8% and Q2’s 3%.
Around the world
Eurozone business activity continued to stall in December, albeit at a softer pace, according to the bloc’s flash Purchasing Managers’ Index. The composite reading, which includes both manufacturing and services data, improved to 49.5 from 48.3 in November – a reading below 50 indicates contraction. While this is an improvement from November’s 10-month low, new orders continued to decline. Meanwhile, Eurozone annual inflation was confirmed at 2.2% in November up from 2% in October, and below the 2.4% from 12 months earlier.
Figure in focus: $600bn
More than $600bn of investors’ money went into global bond funds in 2024, according to a Reuters report. With inflation now easing back towards target levels, many central banks have started lowering interest rates, which has spurred on investors to take advantage by locking in the higher yields available – especially ahead of an ambiguous 2025. According to EPFR data, cited in the report, after $250bn left fixed income funds in 2022, by mid-December 2024, some $617bn was poured into bond portfolios – comfortably beating 2021’s $500bn tally and setting 2024 up to be a record year. Equities attracted $670bn of inflows in the wake of markets hitting new highs.
Words of wisdom
Polarisation - Recently announced as the Merriam-Webster Dictionary's 2024 Word of the Year. It defines polarisation as “division into two sharply distinct opposites; especially, a state in which the opinions, beliefs, or interests of a group or society no longer range along a continuum but become concentrated at opposing extremes.” The word was used widely across the media landscape this year, in particular when discussing the conflicting ideologies of the 2024 US presidential election.
What's coming up?
On Monday, the UK reports its final Q3 GDP growth estimate. On Tuesday, the Bank of Japan and Reserve Bank of Australia publish the minutes of their latest monetary policy meetings – both kept rates on hold at their final gatherings of 2024. Japan also issues its Leading Economic Indicators index on Wednesday and follows up with its unemployment rate on Friday. Also on Friday the US publishes its S&P/Case-Shiller Home Price index.
Subscribe to updates
Have our latest insights delivered straight to your inbox.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
© 2024 AXA Investment Managers. All rights reserved