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Investing.com - A series of interest rate cuts are "nearing an end" across central banks representing ten of the world’s major developed economies, despite the Federal Reserve restarting its own policy easing cycle last month, according to analysts at Wells Fargo.
In a note, the analysts argued that real interest rates in the so-called "Group of 10" are "mixed," but "on balance, have moved closer toward neutral" -- or a level that neither helps nor hinders economic activity.
They added that further disinflation in these economies will be "difficult to achieve and should limit" bias among policymakers toward further rate drawdowns.
While broader economic momentum is "sluggish," they argued, growth over the medium-term is "not far from potential and a need for significantly more easing may not be needed."
Against this backdrop, the analysts including Brendan McKenna and Azhin Abdulkarim predicted that, out of G10 central banks, excluding the Fed, only the Reserve Bank of New Zealand and the Bank of Canada have "adequate policy space" for rate cuts in the fourth quarter this year. New Zealand’s economy is currently in contraction, while Canada is facing a rising unemployment rate and tepid activity.
"Additional easing may be delivered from select institutions, but thematically, our framework reveals G10 easing cycles are mature and nearing an end," they wrote.
The comments come after the Fed slashed interest rates by 25 basis points last month, with officials at the U.S. central bank keen to prioritize a cooling labor market over signs of sticky inflation. Policymakers also projected that more reductions could be coming at the Fed’s final two meetings of the year in October and December.
Markets are now all but pricing in a further quarter-point cut at the Fed’s October 28-29 meeting, and seeing an 87% probability of a similar drawdown at its December 9-10 gathering, CME’s FedWatch Tool showed.