Uncertainty in the economic outlook and the factors influencing monetary policy decisions are reflected in the varying opinions on how much the central bank will decrease policy rates this year. According to a Reuters poll of 77 economists from 25-28 March, while 68 economists estimate that the key interest rate will remain unchanged in April, they predict a cut will happen in June.
The slowdown of inflation has contributed to this speculation. February’s inflation rate was at 2.6 percent compared to 8.5 percent a year prior, with factors such as tight monetary policy, easing energy crises, and supply disruptions contributing to the slowdown. The central bank aims for a two percent inflation rate in the medium term, which adds further weight to the expectation of rate cuts in June.
Financial markets anticipate a 0.25 percentage point cut in June, with some economists predicting a total cut of 1.00 percentage points this year. However, others believe it will be less than that, with just under half estimating cuts of 0.75 percentage points or lower.
New data on wage development is expected to be available at the beginning of June, which could further support the case for interest rate cuts. However, despite these predictions and expectations, uncertainty remains surrounding the central bank’s policy rate cuts and their impact on the economy moving forward.
In summary, while there is consensus among economists that interest rates will be cut by at least one time this year, there are significant differences in opinion on how much they will decrease and when they will occur. As such, uncertainty persists surrounding not only how much interest rates may decrease but also what it means for future economic growth prospects.