Central banks and traders' views on rates to clash
Thursday, February 16, 2023
Significance
The main western central banks -- the Federal Reserve (Fed), the ECB and the Bank of England (BoE) -- have all stated clearly that it is too early to declare victory against inflation. Nonetheless, traders continue to price in rate cuts later this year.
Impacts
- In a sign of the degree to which sentiment has improved, some of the riskiest assets such as ‘junk’ bonds have made large gains this year.
- Commodity markets have not rallied as much as in previous China upturns; China will make a smaller contribution to world GDP this decade.
- Bloomberg’s US Housing and Real Estate Surprise Index is at its highest since April 2022 -- signalling housing activity may improve ahead.
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