This Thursday ushered in the "Super Central Bank Day", the European and American central banks kept interest rates unchanged and issued a signal to "beat inflation", and next year's interest rate "when and how much" has become the focus of the market.
In terms of "interest rate cuts", the Fed suddenly turned to talk about "rate cuts", and Fed Chairman Jerome Powell said that "we are aware of the risk of staying on hold for too long and cutting rates too late".
The European Central Bank and the Bank of England insisted on tightening "not letting go" and shouted that the Fed "will not follow". ECB President Christine Lagarde said that "we are not discussing interest rate cuts at all", while Bank of England President Bailey pointed out that "interest rates will remain high for an extended period of time".
But the question is whether the European and British central banks "screwed" the Fed?The strengthening of the euro and the pound against the dollar will further weaken European exports, and the near-recession of the European and British economies does not support the maintenance of tightening policies.
The Fed kept the target range for the Federal** interest rate at 525%-5.5% unchanged, when talking about the trend of inflation, Powell pointed out in the press conferenceInflation has come down from its highsExtensive surveys of households, businesses and individuals, as well as indicators of financial markets, reflectLong-term inflation expectations appear to remain stableBut the Fed needs to see further evidence to build confidence that inflation is continuing to decline toward its target.
The ECB kept interest rates unchanged for the second time in a row while lowering its inflation forecasts for next year, suggesting that it expects price growth to be brought under control soon and said it would accelerate its exit from a broad stimulus program. As a kind of transformation of **The ECB abandoned a phrase in its previous statement that "inflation is expected to remain high for an extended period of time".
For the third time in a row, the Bank of England kept its benchmark interest rate at 525% unchanged, on the inflation side, Bailey saidThe Bank of England has made great strides, with successive rate hikes helping inflation fall from more than 10% in January to 4.5% in October6%。But he also pointed out that there is still some way to go in the fight against inflation, and the necessary measures will be taken to restore inflation to 2%.
Carsten Brzeski, head of global macro research at ING Bank, noted in a report:
It is now clear that central banks believe that inflation is largely under control.Central banks announced that they were about to defeat the fiercest inflation since the 70s of the 20th century, igniting the world's ****, leading to **bond yields** in various countries.
Regarding the long-awaited "interest rate cut" path in the market, the dot plot released by the Federal Reserve shows that the current round of interest rate hike cycle may have come to an endAt the same time, it shows that there may be 3 interest rate cuts next year.
Powell's attitude has changed dramatically, noting that interest rate cuts are starting to come into view, and policymakers are thinking about when it is appropriate to cut them"We are aware of the risk of cutting rates too late and are very serious about not making such mistakes."
The ECB and the Fed "went against the tune", hitting back against any expectations of the ECB's pivotIt was pointed out that there was no discussion of a rate cut at all this week.
Lagarde believes that the ECB's interest rate should remain stable at least until more definitive wage data emerges, possibly next spring. "We didn't have a discussion, no debate on the issue of rate cuts, and I think everyone in the room thought there should be a plateau between rate hikes and rate cuts," she said.
The Bank of England was more cautious, saying it was too early to consider cutting the key rate.
The Bank of England said "if there is evidence that inflationary pressures are more persistent".Interest rates could even rise again. Three of the nine decision-makers at the Bank of England voted to raise interest rates from 525% to 55%, which underscores the cautious attitude of the Bank of England.
It is worth mentioning that the hawkish attitude of the Bank of England is not only expected guidance, but also largely reflects that inflation in the UK is higher than that of the eurozone and the Federal Reserve.
The Bank of England said it expects headline inflation in the UK to remain at 4 by the end of the yearAround 5%, well above the 2% inflation target it has set with the Fed and the European Central Bank.
The Fed** expects both core and headline inflation to reach 24%, which is close to their target and low enough for the Fed to expect a rate cut.
The European Central Bank (ECB) has lowered inflation** this time, and expects European inflation to be 27% compared to 3 expected in September2%；Inflation is expected to be 21%。
After being misled by inflation last year, central bankers are also worried that if the brakes are loosened too soon, inflation will be **. They warned,Inflation from 3% to 2% is the "last mile" and may be the hardest step to get price growth back to target.
Matthew Ryan, head of market strategy at financial services firm Ebury, said:
We have seen a fairly significant divergence in central bank communication with the market, with the ECB and BoE sticking to their bottom line and saying that there is still some way to go in cutting interest rates, while the Fed is actively encouraging markets and setting the stage for a more aggressive pace of easing.However, despite the hawkish statement, the hawkish stance of the European and British central banks may not last long.
If there is a divergence in interest rates in the United States and Europe, it will lead to the strengthening of the euro and the pound against the dollar, further weakening European exportsThen the risk will be even greater. The euro and the pound both traded at more than 1% against the US dollar on expectations that the ECB and the Bank of England could cut interest rates at a slower pace than the Fed.
Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, noted:
Whether the ECB is happy to cut interest rates or not, progress will largely depend on the Fed, which could force the ECB to intervene with a pre-emptive move.At the same time, the slogans of the Bank of England and the European Central Bank "higher interest rates for longer" also conflict with the cooling of the economyThe 20-nation eurozone economy has experienced negative growth for two consecutive quarters, and the UK has also fallen into economic stagnation and may still face weak growth after 2024.
Economists warn:
If the ECB and the Bank of England keep their key interest rates at current levels for too long, they risk pushing the European economy into recession and bringing inflation below their 2% target.The market now expects the Fed and the European Central Bank to cut interest rates by as much as 150 basis points next year, starting as early as MarchThe Bank of England will cut interest rates by 100 basis points in 2024, with the first rate cut taking place in May.
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