Central Banks Face Inflation Dilemma as Global Economy Teeters

A blockbuster policy week came to a close as major central banks navigated the complex interplay of inflation risks, geopolitical uncertainty, and fragile growth.

The Federal Reserve delivered a unanimous 25bp rate hike to 3.75%-4.00%, reinforcing its inflation-fighting credentials and lifting US yields and the dollar in the process.

In contrast, the Bank of England kept rates unchanged at 3.75%, but ended sales of long-dated gilts, easing pressure on the long end of the curve.

The Bank of Japan raised its key rate by 25bp to 1.25% in a split vote, with two policymakers opposing the move and little urgency around further tightening.