Recent inflation and employment data from some of the world’s major economies surprised markets and prompted analysts to raise expectations for when Fed and ECB rates will peak. Markets now see ECB rates peaking just above 4.0% at the start of the year, while Fed rates are expected to hit 5.5-5.75%.
In emerging markets, the surge in rate hikes is showing signs of slowing. Thirteen of the 18 central banks in Reuters’ sample of developing economies met to decide on interest rate moves, but only four rose by a total of 175 basis points – Mexico, Israel, the Philippines and India. Turkey made a 50 basis point cut after the deadly earthquake.
February’s move follows January, which saw six of 18 central banks make aggregate hikes of 225 basis points in January, while the other six central banks came together but decided to keep interest rates on hold. unchanged.
“This (inflation) shock happened simultaneously for everyone, but may dissipate at different rates,” said Gabriel Sterne of Oxford Economics.
“The disinflationary trend looks surprisingly good in Asia now, for example where services inflation has reversed its course,” he said.
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