Central Banks May Cut Rates in 2027, Not Raise Them by 50bp as Markets Price
Updated
Updated · ING Think · Jun 19
Central Banks May Cut Rates in 2027, Not Raise Them by 50bp as Markets Price
3 articles · Updated · ING Think · Jun 19
Summary
ING’s James Smith argues the Fed, ECB and Bank of England are more likely to be cutting rates within 12–18 months, even as investors price US rates 50 basis points higher a year from now.
In the US, he says the hawkish case rests on shakier ground than headlines suggest: private health, social care and hospitality account for two-thirds of job growth this year, while wage pressure remains limited.
Housing is a second reason Smith expects inflation to cool, with rents barely rising and lower fuel prices, fading airfare spikes and waning tariff effects likely to pull core CPI down.
Europe and the UK could follow a similar path after possible near-term hikes, he says, if food inflation keeps easing and feared second-round effects on wages and prices fail to materialize by early 2027.
That view challenges a market consensus that rates will stay higher until 2028 and implies central banks may soon need to explain why policy is turning lower instead.