| Investors are pushing back their expectations of interest rate cuts around the world, as the US Federal Reserve’s battle with price pressures complicates other central banks’ loosening plans.
Traders now expect the ECB to cut rates by an average of about 0.7 percentage points this year starting at its next policy meeting on June 6, while two weeks ago they expected cumulative cuts of 0.88 points. “There’s a good macro case for divergence, but ultimately there’s a limit on how far it can go,” said Nathan Sheets, chief economist at US lender Citi. He added that it was “more challenging” for the ECB to “cut aggressively in an environment where the Fed is waiting”.
Despite the market’s expectations that high US borrowing costs will limit their freedom of manoeuvre, top European central bankers insist their less serious inflation problem requires a different response. Top officials from the ECB and BoE have signalled rates will still be cut this northern summer, despite the inflation data that has led investors to price in the first Fed rate reduction in November.The shift is a marked contrast to earlier this year when the Fed was seen as leading the way down.
Finance Finance Latest News, Finance Finance Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: FinancialReview - 🏆 2. / 90 Read more »