Dear friends and colleagues:
The CFR Global Monetary Policy Tracker is updated through June 1.
In the past month, only one reserve-currency-issuing central bank raised its policy rate: the Reserve Bank of Australia hiked from 4.1% to 4.35%. The Fed held steady at 3.63%, the ECB at 2%, the PBoC at 3%, the BoJ at 0.75%, the BoE at 3.75%, and the Bank of Canada at 2.25%. Our CFR Index of Global Easing (-)/Tightening (+) remains unchanged for a third straight month at 0.22/10: near-perfect neutrality.
Is this the calm before the storm of higher rates?
Central banks face a tough choice: whether to “look through” higher energy costs fueled by the U.S.-Iran standoff in Hormuz, or to take pre-emptive action before such costs feed through into even greater increases in broader measures of inflation. In the United States, fed funds futures currently imply a roughly 50% chance of at least one 25bp rate hike this year, versus less than a 1% chance of a cut.
Please be sure also to check out our CFR Global Inflation Tracker, which covers nearly 200 countries over the past quarter century.
Sincerely,
