Markets
Charted: IMF Forecasts for International Interest Rates
Charted: IMF Forecasts for International Interest Rates
With inflation impacting markets and international interest rates for more than a year, how are different central banks expected to act in the future?
Although the outlook on inflation remains uncertain, the International Monetary Fund (IMF) expects most advanced economies to begin gradually easing interest rates by mid-2024.
These charts show the IMF’s projected central bank policy rates for four major economies through 2028, using the World Economic Outlook forecast data as of October 2023.
Interest Rates Forecasts for 4 Major Economies (2024‒2028)
Since 2022, interest rates have climbed in the EU, the UK, and the U.S. by at least 4 percentage points.
In 2023, rates have continued to climb at a slower pace and are expected to peak at the start of 2024. The U.S. Federal Reserve, for example, is expected to see interest rates peak around 5.4% before beginning to implement rate cuts in Q3 2024.
| Fiscal Quarter | 🇺🇸 U.S. | 🇪🇺 EU | 🇯🇵 Japan | 🇬🇧 UK |
|---|---|---|---|---|
| 2022Q1 | 0.2% | -0.6% | 0.0% | 0.8% |
| 2022Q2 | 0.8% | -0.6% | 0.0% | 1.5% |
| 2022Q3 | 2.2% | -0.1% | 0.0% | 2.6% |
| 2022Q4 | 3.7% | 1.2% | -0.1% | 3.7% |
| 2023Q1 | 4.6% | 2.2% | 0.0% | 4.3% |
| 2023Q2 | 5.0% | 3.1% | 0.0% | 5.1% |
| 2023Q3 | 5.3% | 3.6% | -0.1% | 5.6% |
| 2023Q4 | 5.4% | 3.9% | -0.1% | 5.9% |
| 2024Q1 | 5.4% | 3.9% | -0.1% | 6.0% |
| 2024Q2 | 5.4% | 3.8% | -0.1% | 5.9% |
| 2024Q3 | 5.3% | 3.8% | -0.1% | 5.7% |
| 2024Q4 | 5.0% | 3.8% | -0.1% | 5.5% |
| 2025Q1 | 4.4% | 3.6% | -0.1% | 5.3% |
| 2025Q2 | 4.1% | 3.4% | -0.1% | 5.1% |
| 2025Q3 | 3.8% | 3.1% | 0.0% | 5.0% |
| 2025Q4 | 3.5% | 3.0% | 0.0% | 4.8% |
| 2026Q1 | 3.1% | 2.8% | 0.1% | 4.7% |
| 2026Q2 | 2.9% | 2.7% | 0.1% | 4.6% |
| 2026Q3 | 2.9% | 2.7% | 0.1% | 4.6% |
| 2026Q4 | 2.7% | 2.7% | 0.1% | 4.5% |
| 2027Q1 | 2.6% | 2.7% | 0.1% | 4.4% |
| 2027Q2 | 2.6% | 2.7% | 0.1% | 4.4% |
| 2027Q3 | 2.6% | 2.6% | 0.1% | 4.4% |
| 2027Q4 | 2.6% | 2.6% | 0.1% | 4.3% |
| 2028Q1 | 2.6% | 2.6% | 0.1% | 4.3% |
| 2028Q2 | 2.6% | 2.6% | 0.1% | 4.3% |
| 2028Q3 | 2.6% | 2.6% | 0.1% | 4.3% |
| 2028Q4 | 2.6% | 2.5% | 0.1% | 4.3% |
On the other hand, Japan has held interest rates at 0% or slightly lower since 2016.
Despite the Japanese yen falling and inflation (and prices) in the country continuing to climb, the Japanese economy as a whole has struggled over the past few decades with weak consumer demand. There are worries that raising interest rates will make economic recovery tougher in the long run.
And as other central banks plan to start cutting rates, Japan is poised to do the opposite. In 2025, the country is forecasted by the IMF to see its first positive interest rates in nine years.
It’s important to remember that future rate cuts will largely depend on whether inflation in countries continues to decelerate. Major developments, such as the Israel-Hamas war, can also disrupt global markets and force central banks to change course.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
| Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
|---|---|---|
| EURO STOXX 50 | 14.9 | 2.2 |
| STOXX Europe 600 | 14.4 | 2 |
| U.S. | 25.9 | 4.7 |
| Canada | 16.1 | 1.8 |
| Japan | 15.4 | 1.6 |
| Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
| EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
|---|---|---|---|---|---|---|
| EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
| STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
| U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
| Canada | 1.00 | 0.22 | 0.40 | |||
| Japan | 1.00 | 0.88 | ||||
| Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
| Index | Description | Market Cap |
|---|---|---|
| STOXX Europe 600 | Pan-regional, broad market | €10.5T |
| STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
| STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
| STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
| EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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