With central bankers in the U.S. and eurozone meeting this week, and their U.K. counterparts convening on Aug. 3, investors hope that the latest good news on inflation will mean rate-setters moderate their plans to keep raising borrowing costs.
Investors no longer expect U.K. rates to surge as high as the 6.5 per cent they bet on just a few weeks ago. Some think the ECB may also be close to a pause, after Klaas Knot, usually one of the most hawkish members of the ECB’s governing council, on July 25 said that rate increases beyond the July meeting were “by no means a certainty.”Article content
Others say that if economies do prove resilient and the jobs markets remain strong, central banks will end up having to take a harder monetary stance than markets are pricing in. Adam Posen, president of the Peterson Institute for International Economics, said U.S. inflation could come down without a recession in an economy where labour traditionally has less bargaining power.