At the outset of 2024, interest rates were still the main concern in financial markets, with expectations of rate cuts totalling 125 basis points from the US Federal Reserve and up to 150 basis points from the European Central Bank (ECB). There were also expectations of rate cuts in Norway, albeit more modest – around 50 basis points.
Throughout 2024, inflation rates fell, as expected, clearing the way for rate cuts. By the end of the year, both the Federal Reserve and the ECB had cut their key rates by 100 basis points. The Swedish Riksbank cut as much as 125 basis points (and a further 25 basis points just after year-end), while Norges Bank, as an exception, left its key interest rate unchanged at 4.5%.
Market rates followed suit, but only at the very short end. The yield on 2-year US government bonds hardly budged. And the world’s presumably most important interest rate, the yield on 10-year US government bonds, instead rose from 3.88% to 4.54%. This was about one percentage point higher than expectations at the start of the year – despite monetary policy expectations in general being met.
Getting your expectations right does not guarantee that you are right about the consequences.
Finn Øystein Bergh
Chief economist and -strategistFinn Øystein Bergh joined Pareto in 2010, the first years in Pareto AS before joining Pareto Asset Management in 2015. He has previous experience as a journalist, chief economist and later managing editor in the financial magazine Kapital. Finn Øystein Bergh holds an MSc in Economics and Business Administration, MBA, cand. polit. (an extended master's degree) in political science and cand.polit. in economics. He writes the financial blog Paretos optimale, and has published several books on economics.