Henceforth, it is expected to see rate cuts by the US Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BOE), although easing will be slower and shallower than currently expected by financial markets.

“We expect policy rates to fall 75 basis points by the end of 2024 in all three economies, taking the Fed Funds rate (upper band) to 4.75%, the ECB Main Refinancing Rate to 3.75% and BOE Bank Rate to 4.5%,” said the credit rating agency in a statement.

It noted that major central banks have kept their policy rates unchanged in recent months.

“Concurrently, headline consumer price index (CPI) inflation rates have fallen quite quickly, with earlier monetary policy tightening resulting in household and corporate credit flows slowing rapidly,” it said.

Fitch Ratings also pointed out that the US household debt growth (seasonally adjusted annual rate) fell in Q3 2023 to 2.5% and non-financial corporate debt growth slowed to just 1.5%, well down on rates seen in late 2022.

“The fall in credit growth is even more pronounced in the Eurozone, where household and corporate credit growth rates fell to the lowest levels seen in many years.

“Loans to non-financial corporations contracted in October by 0.3% year-on-year (y-o-y), the first outright contraction since July 2015. The UK, Switzerland, and Canada have also seen credit growth sharply slowing,” it said.

On another note, it said headline CPI inflation continues to decline among the majority of Fitch20 economies, with some notable exceptions, including Russia and Turkiye.

The agency also highlighted the weakness in international trade, whereby both export and import volumes contracted on an annual basis in recent months in the US, the Eurozone, Japan, and the UK, among others.

Chinese export volume growth also remained subdued, it added.