Chart of the week
Norway’s central bank raised its benchmark interest rate by 0.25% at its recent meeting. After having lowered its policy rate from 1.50% down to 0.00% at the beginning of 2020, this increase brings an end to almost eighteen months of zero interest-rate policy. The Norges Bank is following in the footsteps of several emerging market central banks that have already raised policy rates and is considering additional increases in the months ahead.
OUR ANALYSIS
Last week saw various G10 central banks hold their monetary policy meetings and a change became apparent. Fed Chair Jerome Powell confirmed that tapering will begin soon and could be completed by mid-2022. The FOMC members’ rate forecasts have also edged slightly higher. Similarly, the Bank of England’s messaging has led to consensus expectations of a rate increase during the first quarter of 2022. As for the ECB, while rhetoric was dovish, leaks over its internal long-term projections that inflation would reach its 2.0% target in 2025 put pressure on rates.
While the current shift in central bank policy stance is of a gradual nature, it may sharpen if inflation readings remain stubbornly high.
See also: https://latribune.lazardfreresgestion.fr/en/united-states-a-deceptive-slowdown-in-inflation/
The following opinion was written on September 30, 2021 and is susceptible of changing.
Sources : Bloomberg, and calculation from Lazard Frères Gestion
As of : September 30, 2021
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