next week for the annual meetings of the International Monetary Fund and World Bank, may disagree over the exact drivers of a global bond rout that now appears to reflect more than guessing how far central bankers will raise interest rates.
"There should be concern less about the level and more about the pace of change," said Gene Tannuzzo, global head of fixed income at Columbia Threadneedle. But that moment passed without any broader contagion, and the outlook turned steadily brighter from there, particularly in the U.S.: The prospect of continued economic growth alongside falling inflation - the so-called soft-landing scenario - went from a history-defying aspiration to, in effect, the Fed's baseline.
"There are effects that could happen if you create budget strains in other countries or ultimately budget crises in other countries. I think that is something that the Fed needs to be watching," Karen Dynan, an economics professor at Harvard University, said during a presentation last week at the Peterson Institute for International Economics in Washington. "Those sorts of crises could spill over into broader financial markets and then pose a real threat to our economy.
It is those rates that can propel or depress an economy, and feed or stifle inflation. The issue before policymakers is whether the recent market moves have gone beyond what is needed to tame inflation and created unwanted risks to growth.