Fed, ECB, and BOE hop aboard the ‘transitory’ inflation express | Malay Mail

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Fed, ECB, and BOE hop aboard the ‘transitory’ inflation express | Malay Mail
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WASHINGTON, Nov 4 — The world’s top central banks are pushing back in unison on the idea that higher interest rates will be needed to fight a run of high inflation and have now bound their monetary policies tight to the hope that the world’s tangled supply chains are on the verge of repair....

WASHINGTON, Nov 4 — The world’s top central banks are pushing back in unison on the idea that higher interest rates will be needed to fight a run of high inflation and have now bound their monetary policies tight to the hope that the world’s tangled supply chains are on the verge of repair.

It’s a recommitment, in a sense, to one of the core aims of monetary policy since the onset of the pandemic: To keep borrowing costs low for long enough to see households and national economies through to the end of the health crisis, a goal still not met given ongoing infections, missing jobs, and uncertainty about when workers might more fully return.

“Our tools cannot ease supply constraints,” Powell said in a news conference on Wednesday after the release of the Fed’s latest policy statement. But, in an outlook now shared among major developed countries, “we continue to believe that our dynamic economy will adjust to the supply and demand imbalances and that as it does, inflation will decline to levels much closer to our 2 per cent longer-run goal.

That led to a rush of expectations that the major monetary policy actors would accelerate their own timelines for rate hikes. Rate futures and bond markets on both sides of the Atlantic had repriced for an earlier rate-hike lift-off by the Fed and ECB over the last month in the face of an inflation environment that was threatening to prove more sticky than transient.

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