Three rate hikes, one warning: The inflation fight isn't over
It is rare for the worlds biggest central banks to move in the same direction. Yet within the space of just over a week, the European Central Bank (ECB), the Federal Reserve (Fed) and the Bank of Japan (BoJ) all raised interest rates, while the Bank of England (BoE) stopped just short of joining them. The decisions came against very differenteconomic backdrops. The US economy continues to outperformexpectations, the Euroland is proving more resilientthan many anticipated, Japan is only beginning to emergefrom decades of ultra-loose monetary policy, and the UK remains caught between slowing inflation and subdueddomestic demand. So why are policymakers in such different economies suddenly sounding so similar？ The answer may lie less in where inflation is today than in where central banks fear it could be heading. Inflation is changing shape Only a few months ago, markets became increasingly confident that inflation was finally moving under control. Supply chains had largely normalised, goods inflation had eased and investors began looking beyond inflation towards economic growth. That optimism has faded. The renewedrise in energy prices following the conflict in the Middle East has forced central banks to reassessthe outlook. Yet it is not crude Oil itself that concerns policymakers most. The real worry is what happens afterthe
