Major central banks are being bet on by Wall Street to make the first move.

• The Swiss National Bank is predicted to be the first G10 central bank to lower interest rates based on market forecasts.
• Analysts anticipate that the Bank of Japan will terminate its negative interest rates policy and yield curve control in April.

Analysts predict that the Bank of Japan and the Swiss National Bank are the two central banks most likely to alter their course in the upcoming two months, with contrasting directions.

In June, the U.S. Federal Reserve is predicted to make its first cut, with markets anticipating a 25 basis point reduction to bring the Fed funds target rate to a range of 5% to 5.25%, as indicated by CME Group's FedWatch tool.

The Fed's January meeting minutes revealed officials' concerns about hastily reducing interest rates, despite their optimism about the overall decline in inflation.

The European Central Bank is projected to start cutting in June, with euro zone inflation easing to 2.8% in January while economic growth remains stagnant across much of the bloc.

A recent Reuters poll indicates that the Bank of England is projected to be among the last to loosen its monetary policy, with a slim majority of economists forecasting a first cut in August.

Goldman Sachs revised its rate cut projections from May to June due to several key inflation indicators appearing "on the firmer side."

The Wall Street giant predicted that the Monetary Policy Committee would make five 25 basis point cuts this year, instead of the market consensus of three, resulting in a main Bank rate of 4% by December.

According to LSEG data, the Swiss National Bank is expected to cut its key rate by 25 basis points in March, with a 60% chance of being the first G10 central bank to do so, bringing its key rate down to 1.5%.

Inflation in Switzerland decreased in January, with headline inflation falling from 1.7% to 1.3% and core inflation dropping from 1.5% to 1.2%, both below consensus forecasts.

According to Capital Economics analysts, the sharp decline implies that inflation is likely to fall below the SNB's Q1 forecast of 1.8%.

We believe that the decrease in core inflation will prompt the SNB to lower the policy rate from 1.75% to 1.50% at their March meeting.

Despite the ongoing debate, UBS economists predict that the SNB will begin reducing interest rates in June, with two additional cuts in September and December, ultimately leading to a terminal rate of 1%.

Last week, Switzerland's largest bank stated that it believes the SNB will delay its decision to raise interest rates until domestic price pressures caused by higher rents no longer pose an upside risk to inflation, which is currently forecasted to reach 2% in Q2.

"Despite the January inflation surprise, we believe the SNB's forecast is too optimistic, and the likelihood of a policy rate cut on 21 March has increased. In order to cut rates, we believe the SNB's inflation forecast must decline below 1.5% from its current 1.6%, and the forecast path must become downward-sloping."

Bank of Japan to end negative rate era

The Bank of Japan is facing the opposite question as most major central banks, which are considering easing monetary policy after two years of tightening to combat inflation.

According to a research note on Tuesday, the Bank of Japan has the necessary tools to end its negative interest rate and yield curve control policies.

Since January 2016, the BOJ has kept its short-term deposit rate at -0.1% in an attempt to stimulate the economy out of a prolonged stagnation. If the BOJ decides to raise the rate, it would be Japan's first hike in 16 years.

In January, the country's core inflation rate, which does not include food and energy, decreased to 2% year-on-year, following three consecutive monthly increases. This slight surprise to the upside indicates that a sustainable return to ultra-low inflation may not be achievable.

If inflation does not drop to its 10-year average (1%), there is no reason to delay ending negative interest rate and yield curve control policies, according to Kit Juckes, the French bank's global head of foreign exchange strategy.

In April, it is predicted by a substantial number of analysts that the BOJ will conclude its eight-year run of negative interest rates and its yield curve control policy.

In July, the central bank introduced flexibility to its YCC policy, which involves targeting a specific interest rate and buying and selling bonds to maintain the yield on government bonds within that range.

RBC Wealth Management's head of investment strategy in the British Isles and Asia, Frédérique Carrier, stated in a note on Friday that the Bank of Japan (BOJ) has been hesitant to control above-target inflation by ending its negative interest rate policy due to concern about negatively impacting Japan's already weak economy.

Despite maintaining a loose monetary policy, the yen is being weakened, contributing to inflation. Inflation in Japan has been above the two percent target for nearly two years, prompting most western central banks to tighten, but the BoJ is proceeding with caution.

"The memory of Japan's deflation persists, and its consumption remains fragile due to its aging population (average age of 49 years old compared to 39 in the U.S.). Rapidly increasing hiking rates could potentially harm the economy."

The weak yen has benefited exporters but caused problems for importers, and is contributing to inflation in Japan, according to Carrier. The company believes that the market pricing for a 10 basis point hike by June and 25 basis points by year-end is prudent enough not to harm the economy.

In our view, the interest rate differential with Japan will decrease due to other central banks cutting rates this year, which will ease the pressure on the yen.