Fed likely to cut rates before ECB blinks, former BOE member says

The U.S. Federal Reserve is likely to cut interest rates before the European Central Bank does, a former member of the Bank of England said, defying current market expectations.

“I suspect that the Fed will be the first to really put a cut in,” DeAnne Julius, a founding member of the Monetary Policy Committee of the Bank of England, told CNBC on Tuesday.

Investors are closely monitoring central bank moves on the back of a considerable reduction in inflation across major economies. The expectation of reduced rates has boosted equity markets since late 2023.

So far, Switzerland was the first major economy to cut interest rates back in late March.

Market players are currently pricing in a 92.8% chance that the ECB will cut rates in June from the historically high level of 4%, according to LSEG data. The same database shows only a 53.5% chance of a cut by the Federal Reserve at their June meeting.

Julius explained her forecast was based on the Fed’s dual mandate, which looks at both inflation and employment in the U.S. economy. The latest job figures pointed to a buoyant U.S. labor market, and inflation has also dropped though it is still above the Fed’s 2% target.

Source: CNBC