Global central banks unite in 'higher for longer' credo
- Central banks for the world's biggest economies have served notice that they will keep interest rates as high as needed to tame inflation, even as two years of unprecedented global policy tightening reaches a peak.
Their task is to convince financial markets not to undo their work with bets on early rate cuts, and to watch for new risks such as rising oil prices - while hoping governments help with budgets that do not further fuel inflation. In Europe, ECB President Christine Lagarde was adamant last week that further hikes for the 20-country euro zone could not be ruled out. The central banks of Norway and Sweden both signalled on Thursday they could hike again, with even the Swiss National Bank holding out the prospect of further interest rate hikes despite inflation at a comfortable 1.6%.
Yet for all the tough rhetoric, investors remain sceptical that central banks will stay the course given doubts over the strength of the Chinese economy and geopolitical worries, from the Ukraine war to U.S.-Chinese rivalry. With the United States and Europe both seen avoiding the outright recession once predicted, the enticing view of a"soft landing" for the global economy is coming back into sight, largely thanks to unusually buoyant labour markets.