In the past two weeks, a much brighter light has been shone on how and why the world’s most influential central banks are scrambling to regain control of the inflation narrative and contain further damage to their policy credibility.
The key message coming out of recent meetings of central bank policymakers is that inflation is higher and more persistent than expected — and the risks to their projections are tilted to an ever-greater rate of price rises. It is a major shift for the US Federal Reserve and the European Central Bank which, unlike the Bank of England, maintained a call that inflation was “transitory” for far too long.
Already concerns about inflationary expectations becoming more embedded are building. There is a risk that price and wage setting shifts from seeking to compensate for the impact of past cost increases to also starting to include an element for future anticipated inflation.
These considerations led the Bank of England to raise interest rates by 25 basis points, the first time it has opted for back-to-back increases since 2004. The fact that four of the five members of the Bank’s policymaking committee preferred an immediate 50 basis points rise suggests that a third consecutive increase at the next meeting is almost a done deal.
It took way too long for the Fed and ECB to correct their misreading of price increases. The additional difficulties this poses are now being compounded and will undoubtedly affect all of us.
Although not a week with many high impact events, the aftereffects of policy meetings will surely be felt.
This Week’s High Impact Events
The times below are GMT +2.
Monday 7th February
No High Impact Events
Tuesday 8th February
No High Impact Events
Wednesday 9th February
17.30 – US – Crude Oil Inventories
Potential instruments to Trade: USD & CAD Crosses.
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Aviso de risco: os nossos produtos são negociados com alavancagem e apresentam um alto nivel de risco, podendo perder todo o seu capital. Estes produtos podem não ser adequados a todos pelo que deve garantir que entende todos os riscos envolvidos. Transparência completa.
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