Crucial Week for Base Rates. Fed and ECB in Center of Attention

Another week is full of meetings in central banks of different countries, which will determine their monetary policy for the first half of 2024. Financial operators’ eyes are on the Federal Reserve, which is due to weigh in on base rates on December 13th. Analysts believe that Fed Chairman Jerome Powell will keep them at the level of 5.25-5.50%.

Expectations regarding the stability of Fed rates are fueled by a positive report on the US labor market. November employment data beat estimates. The United States added 199,000 more jobs (excluding agriculture) last month than in the previous month, 9,000 more than expected. Unemployment fell from 3.9% in October to 3.7% in November. At the same time, average hourly wages grew by $0.12 (+0.35%), increasing to $34.10, +3.96% compared to 2022.

The next day, Thursday, December 14, the European Central Bank (ECB), Bank of England (BoE), Norwegian Bank, and Swiss National Bank (SNB) will meet to update their rate policies. While no upward decisions are expected from the ECB, Norway’s regulator could actually raise rates. According to analysts, “there is also a risk that the SNB may resort to new interventions to weaken the franc.”

In recent weeks, the Swiss franc has strengthened further against the euro, reaching new historical levels. The price of the European currency approached 0.94 francs, falling to its lowest level since January 2015. Back then, the abolition of the so-called “minimum exchange rate threshold” established by the SNB provoked a quake in the foreign exchange markets. According to UBS experts, “the eurozone currency is missing out on expectations that the European Central Bank will cut rates in the spring of 2024, while the SNB may begin its first downward intervention only in June.” As Bloomberg wrote, “the economic growth of the Swiss Confederation, which is better than in the eurozone, is also putting pressure on the franc against the euro.”