Gearing up for hikes
The Federal Reserve’s rate setting committee (FOMC) is set to meet next week (July 26-27). The market is expecting a 75bps hike (similar to the one delivered in June) to combat inflation, which rose to 9.1%. Following the July meeting, economists see a smaller move in September. The committee is up against a tough fight – trying to bring inflation down without tipping the economy into a prolonged recession.
Running up that hill (too)
Like the Fed, the European Central Bank (ECB) made an outsized move this week – raising interest rates by double the amount that was expected from forward guidance. The somewhat unexpected move came as officials stated that they have to ensure that inflation expectations do not become entrenched, leading to potential wage price spirals and making it much harder to tame inflation. Interestingly, the ECB has reversed hikes in 2008 and...