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Central bankers head to the U.S. mountains, inflation returns badly

William Schomberg and Balazs Koranyi

LONDON/FRANKFURT (Reuters) – This time last year, the world’s largest central banks banded together to get the inflation story wrong.

Now, as top policymakers gather for the Kansas City Fed’s annual monetary policy meeting in Jackson Hole, Wyoming, the Fed looks likely to deliver a “soft landing” for its own economy , but the outlook for Europe is more worrisome.

Much of the world is facing the fastest price growth since the early days 1980, raising fears of a repeat of the era of wage prices The spiral requires double-digit interest rates – and a painful recession – to restore price stability.

This has led many central banks to head to the Grand Tetons this week in hopes that today’s inflationary pressures will subside quickly, allowing them to deal with the expected recession in the global economy.

ng recession and high inflation. Their first concern is responding to high inflation,” said Holger Schmieding, chief economist at Berenberg. “

However, the shift is likely to occur asymmetrically, especially as the Fed has expressed a reluctance to reverse quickly.

For example, this time last year, the Fed chairman Jerome Powell’s assertion that the jump in inflation may be temporary. With that claim unraveled, he became the driving force behind the fastest pace of monetary tightening in the U.S. in four decades.

In addition, He and others at the U.S. central bank have also expressed a willingness to tolerate a measure

although there are some signs that the Fed may soon cut rates from

. -Based on the pace of the last two policy meetings, Powell may use his keynote at Friday’s symposium to share investor expectations for 2023 cuts in borrowing costs

“Powell may try to emphasize a slower pace of rate hikes, but also a longer stretch in restrictive territory, bringing a bit of wind to the dovish pivot narrative,” Jack Janasiewicz, chief portfolio strategist at Natixis Investment Managers Solutions.

‘Not going away anytime soon’

U.S. consumer price inflation falls But still close to 20 July’s annual high of 8.5% – down from 9.1% the previous month – expected

on average nearly 4%.

Prospects for energy imports to Europe are significantly worse, with Russia’s invasion of Ukraine causing soaring energy prices, as Moscow passes restrictions on natural gas Energy prices appear set to continue rising as energy flows in retaliation for European sanctions.

Measures taken by Germany and others to cushion the blow to consumers’ cost of living are starting to expire, the Bundesbank warned this week that the euro zone Price growth will now be in double digits.

ECB forecasts show euro zone inflation will fall to 3.5% in 20, but its data Having been revised upwards steadily, Germany now sees inflation above 6%, suggesting the next ECB forecast in September will be higher.

“These inflationary pressures are likely to persist for some time,” will be in Jackson Hole ECB board member Isabel Schnabel, who spoke at the symposium, told Reuters in an interview last week.

“They’re not going away anytime soon. Even if monetary policy continues to normalize, it will take some time for inflation to return to 2%. “

ECB last month raised interest rates for the first time in 11 years.

UK It has done less to protect households from soaring energy prices than most other European countries, and is also suffering from an American-style inflationary heat in the labor market, adding to the drama.

Citi analysis The division said this week that UK inflation will take a hit 20% in early trade 20 1976 The highest rate since the Bank of England has raised rates six times since December.

Although other analysts believe the peak is higher than Low, but the hit to living standards is fueling speculation that Prime Minister Boris Johnson’s successor will have to propose a new round of huge support for families to avoid a surge in poverty.

“In the UK, Societe Generale (OTC: SCGLY).

but Richard Flynn, Charles Schwab (NYSE: SCHW) The U.K. has spotted some early signs of a global shift in the monetary policy stance of the central banks in Brazil and the Czech Republic – one of the first movers in last year’s hiking cycle – suggesting their rates may have peaked.

“The transition from rate hikes to production cuts over the past 20 years tends to be sudden rather than gradual, usually in response to recessions,” Flynn said.

“This year’s workshop may provide an early indication of when a shift from rate hikes to production cuts may occur.”




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