After reaching historically high levels in 2022, global inflation continued to decline in 2024 following a downward trend that began in 2023. This decline was driven by tight monetary policies, easing commodity prices, and the normalization of supply chains. While disinflation was more evident in goods categories, the services sector displayed persistent rigidity.
Due to the stickiness in inflation, a tight labor market, and strong economic growth, the U.S. Federal Reserve (Fed) was only able to begin interest rate cuts in September 2024. In addition to these factors, uncertainty stemming from the U.S. election results also weighed on policy decisions, limiting the rate cuts to a total of 1 percentage point: a 0.5-point cut in September, followed by two 0.25-point cuts in November and December. As a result, the Fed Funds target rate – which had been raised to 5.5% in March 2022, the highest level in more than two decades, and maintained at that level until July 2023 – ended 2024 at 4.5%.
The European Central Bank (ECB), which had raised its policy rate (Deposit Facility) by a total of 4.5 points between July 2022 and September 2023 to reach 4%, began cutting rates earlier than the Fed due to recessionary pressures. The ECB initiated its easing cycle in June 2024 and lowered rates by 0.25 points in four consecutive moves, bringing the policy rate down to 3% by year-end.
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