Markets
Visualized: Interest Rate Forecasts for Advanced Economies
Interest Rate Projections for Advanced Economies
While U.S. inflation cooled in the second half of last year, price pressures returned in 2024, leading investors to rethink how soon central bankers will cut rates.
Despite the recent increase, the interest rate forecast for many economies looks optimistic, thanks to subdued energy price shocks and abating supply chain disruptions. Still, short-term risks remain, including persistently high services inflation clouding the outlook.
This graphic shows the interest rate forecast for advanced economies, based on the International Monetary Fund’s (IMF) 2024 World Economic Outlook.
Get the Key Insights of the IMF’s World Economic Outlook
Want a visual breakdown of the insights from the IMF’s 2024 World Economic Outlook report?
This visual is part of a special dispatch of the key takeaways exclusively for VC+ members.
Get the full dispatch of charts by signing up to VC+.
A Closer Look at the IMF Interest Rate Forecast
Below, we show the projected path of interest rates based on the IMF’s latest data:
| Federal Reserve | ECB | Bank of Japan | Bank of England | |
|---|---|---|---|---|
| Q1 2024 | 5.4% | 4.0% | -0.1% | 5.3% |
| Q2 2024 | 5.3% | 3.9% | 0.0% | 5.3% |
| Q3 2024 | 5.0% | 3.7% | 0.0% | 5.0% |
| Q4 2024 | 4.7% | 3.4% | 0.1% | 4.8% |
| Q1 2025 | 4.5% | 3.2% | 0.1% | 4.5% |
| Q2 2025 | 4.3% | 3.0% | 0.1% | 4.3% |
| Q3 2025 | 4.1% | 2.7% | 0.1% | 4.0% |
| Q4 2025 | 3.9% | 2.7% | 0.2% | 3.8% |
| Q1 2026 | 3.7% | 2.6% | 0.3% | 3.5% |
| Q2 2026 | 3.5% | 2.6% | 0.4% | 3.5% |
| Q3 2026 | 3.3% | 2.6% | 0.4% | 3.5% |
| Q4 2026 | 3.1% | 2.6% | 0.6% | 3.5% |
| Q1 2027 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q2 2027 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q3 2027 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q4 2027 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q1 2028 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q2 2028 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q3 2028 | 2.9% | 2.6% | 0.6% | 3.5% |
| Q4 2028 | 2.9% | 2.6% | 0.6% | 3.5% |
As we can see, the U.S. is forecast to see its first rate cut in the second quarter of 2024.
Broadly speaking, rates will be cut very gradually, with two additional rate cuts anticipated for this year. By 2027, interest rates are projected to fall to 2.9% after a series of moderate rate cuts as inflation dissipates.
Like the U.S., the European Central Bank is forecast to cut rates in the second quarter of 2024, with rates set to fall to 2.6% by 2026. While inflation has cooled at a faster rate across Europe compared to the U.S., GDP growth is also projected to be more muted. This year, the IMF projects that GDP across the euro area will increase just 0.8% versus 2.7% for the U.S. economy.
In the UK, monetary easing is projected to move more gradually, with the first cut projected for the third quarter of this year. Growth across the UK economy is projected to be tepid for 2024, weighed down by the impact of higher rates, lower productivity, and sluggish investment growth.
Rates Rising Slowly in Japan
After years of enduring negative interest rates, Japan raised its short-term policy rate to 0.0-0.1% in March 2024.
This was due in part to a promising inflation outlook over the coming years. The IMF projects that the next rate hike will take place in the fourth quarter of 2024, as it moves away from a multi-decade battle with deflation.
Get the Full Analysis of the IMF’s Outlook on VC+
This visual is part of an exclusive special dispatch for VC+ members which breaks down the key takeaways from the IMF’s 2024 World Economic Outlook.
For the full set of charts and analysis, sign up for VC+.
Maps
Mapped: The 10 U.S. States With the Lowest Real GDP Growth
In this graphic, we show where real GDP lagged the most across America in 2023 as high interest rates weighed on state economies.
The Top 10 U.S. States, by Lowest Real GDP Growth
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
While the U.S. economy defied expectations in 2023, posting 2.5% in real GDP growth, several states lagged behind.
Last year, oil-producing states led the pack in terms of real GDP growth across America, while the lowest growth was seen in states that were more sensitive to the impact of high interest rates, particularly due to slowdowns in the manufacturing and finance sectors.
This graphic shows the 10 states with the least robust real GDP growth in 2023, based on data from the Bureau of Economic Analysis.
Weakest State Economies in 2023
Below, we show the states with the slowest economic activity in inflation-adjusted terms, using chained 2017 dollars:
| Rank | State | Real GDP Growth 2023 YoY | Real GDP 2023 |
|---|---|---|---|
| 1 | Delaware | -1.2% | $74B |
| 2 | Wisconsin | +0.2% | $337B |
| 3 | New York | +0.7% | $1.8T |
| 4 | Missississippi | +0.7% | $115B |
| 5 | Georgia | +0.8% | $661B |
| 6 | Minnesota | +1.2% | $384B |
| 7 | New Hampshire | +1.2% | $91B |
| 8 | Ohio | +1.2% | $698B |
| 9 | Iowa | +1.3% | $200B |
| 10 | Illinois | +1.3% | $876B |
| U.S. | +2.5% | $22.4T |
Delaware witnessed the slowest growth in the country, with real GDP growth of -1.2% over the year as a sluggish finance and insurance sector dampened the state’s economy.
Like Delaware, the Midwestern state of Wisconsin also experienced declines across the finance and insurance sector, in addition to steep drops in the agriculture and manufacturing industries.
America’s third-biggest economy, New York, grew just 0.7% in 2023, falling far below the U.S. average. High interest rates took a toll on key sectors, with notable slowdowns in the construction and manufacturing sectors. In addition, falling home prices and a weaker job market contributed to slower economic growth.
Meanwhile, Georgia experienced the fifth-lowest real GDP growth rate. In March 2024, Rivian paused plans to build a $5 billion EV factory in Georgia, which was set to be one of the biggest economic development initiatives in the state in history.
These delays are likely to exacerbate setbacks for the state, however, both Kia and Hyundai have made significant investments in the EV industry, which could help boost Georgia’s manufacturing sector looking ahead.
-
Culture5 days agoHow Popular Snack Brand Logos Have Changed
-
Markets2 weeks agoMapped: The Most Valuable Company in Each Southeast Asian Country
-
Technology1 week agoMapped: The Number of AI Startups By Country
-
Healthcare1 week agoLife Expectancy by Region (1950-2050F)
-
Markets1 week agoThe Growth of a $1,000 Equity Investment, by Stock Market
-
Markets1 week agoMapped: Europe’s GDP Per Capita, by Country
-
Money1 week agoCharted: What Frustrates Americans About the Tax System
-
Technology1 week agoCountries With the Highest Rates of Crypto Ownership