Add news
March 2010
April 2010
May 2010June 2010July 2010
August 2010
September 2010October 2010
November 2010
December 2010
January 2011
February 2011March 2011April 2011May 2011June 2011July 2011August 2011September 2011October 2011November 2011December 2011January 2012February 2012March 2012April 2012May 2012June 2012July 2012August 2012September 2012October 2012November 2012December 2012January 2013February 2013March 2013April 2013May 2013June 2013July 2013August 2013September 2013October 2013November 2013December 2013January 2014February 2014March 2014April 2014May 2014June 2014July 2014August 2014September 2014October 2014November 2014December 2014January 2015February 2015March 2015April 2015May 2015June 2015July 2015August 2015September 2015October 2015November 2015December 2015January 2016February 2016March 2016April 2016May 2016June 2016July 2016August 2016September 2016October 2016November 2016December 2016January 2017February 2017March 2017April 2017May 2017June 2017July 2017August 2017September 2017October 2017November 2017December 2017January 2018February 2018March 2018April 2018May 2018June 2018July 2018August 2018September 2018October 2018November 2018December 2018January 2019February 2019March 2019April 2019May 2019June 2019July 2019August 2019September 2019October 2019November 2019December 2019January 2020February 2020March 2020April 2020May 2020June 2020July 2020August 2020September 2020October 2020November 2020
News Every Day |

Rate cut bets melt as vaccines boost economy hopes

November 18, 2020

By Saikat Chatterjee

LONDON (Reuters) – Expectations of interest rate cuts in some of the world’s biggest economies have melted within the space of a month on hopes a successful coronavirus vaccine will fuel a growth bounceback next year.

As recently as Oct. 20, markets were pricing rate cuts of up to 25 basis points from leading central banks by next autumn as the resurgent pandemic threatened a double-dip recession.

But encouraging updates on vaccines from Pfizer and Moderna have tempered that gloom, a mood reflected in a rise in long-dated government bond yields and a lower chance of rate cuts, according to Berenberg economist Florian Hense.

“The success of vaccine trials has been a game-changer – there’s now a realistic possibility that a large share of the population of most advanced economies will receive a vaccine by mid-2021, which in turn will allow restrictions on activity and movement to be lifted and bring forward the economic recovery,” said Neil Shearing, group chief economist at Capital Economics.

Between Nov. 5-9, a period when it became clear Democrat Joe Biden had won the U.S. election and Pfizer announced its vaccine news, eurodollar futures <0#ED:>, which track short-term U.S. rate expectations, flipped to reflect expectations of 10 bps in rate hikes by Sept 2022.

Just the previous week, markets were predicting no changes. Futures now expect U.S. rates at 0.50% by September 2023, from 0.25% forecast a month previously.

At the ECB where rates are already minus 0.5%, a nine bps cut was expected by September 2021 but that is now slashed to only five bps.

The biggest change is in the United Kingdom which has fared especially badly in the pandemic and could be one of the biggest beneficiaries from a vaccine.

Markets now expect a cumulative five bps in cuts from the Bank of England up to August 2021, down from 15 bps of reductions priced last month when the BOE looked likely to take borrowing costs negative by March.

Countries whose fortunes are more tied to China have also seen rate cut expectations fall as data indicated a strong recovery. The Reserve Bank of Australia is expected to cut rates by around 2 bps over the next year compared to nearly 6 bps last month.

Graphic – Rate cuts:

(Reporting by Saikat Chatterjee; Editing by Toby Chopra)

Read also

Meet Blake McKernan, the unknown undefeated boxer facing Badou Jack who was army machine gunner and Iraq veteran

Tier 3 ‘disappointing’ given Covid cases are falling and R rate is ‘BELOW 1’, blasts expert

Pope Francis remembers fellow Argentine Maradona

News, articles, comments, with a minute-by-minute update, now on — latest news 24/7. You can add your news instantly now — here