Central Banks are on a Likely Rate Path Forward

ECB Indicates the Lack of Momentum for Another Aggressive Rate Hike

According to those familiar with the situation, European Central Bank (ECB) officials might delay rate increases by just 50 basis points next month. Preliminary talks indicate that another 75 bps increase at this time is unlikely. Governing Council discussions are private. The majority may well choose the less aggressive path, they believe, unless there is another unexpected rise in prices.

The half-point shift in the deposit rate to 2% would reach close to a “neutral” level that no longer stimulates the economy. This prospect is one of the reasons given. Bargaining over a start to reduce the company’s balance sheet was also mentioned.

According to ECB Vice President Luis de Guindos, the next inflation reading, due on November 30, will be “useful.” Both the December decision and a number feed into quarterly predictions will benefit. However, he didn’t get into deeper specifics.

Fed Officials Warn of “painful Outcomes” Resulting from The Monetary Tightening

In an interview with a central bank official, inflation poses the threat of becoming entrenched in the economy of the United States. The overheated labor market makes it harder for the Federal Reserve to reduce inflation without a recession. To contain inflation, at a 40-year high, officials are raising rates at the fastest clip since the early 1980s. The Fed expanded the federal-funds rate to a range of 3.75% to 4% on November 2. This happened after approving its fourth straight 0.75 percentage point rise.

After the Labor Department revealed that core prices increased 0.3% in October from September, markets recovered last week. This was the smallest monthly increase in a year. In October, core prices climbed by 6.3%, while overall prices climbed by 7.7%. Investors and policymakers pay close attention to core readings as a reflection of broad price pressures and a predictor of future inflation.

TInvestors’ enthusiasm may harm the Fed’s efforts to maintain tighter financial conditions over and better economic data. Officials believe them to be crucial to their strategy of slowing economic growth. Ms. George said that because of such actions, it was becoming more essential for the central bank to communicate clearly about its intentions to keep rates higher for longer.