Central Banks Scramble to Combat Rising Inflation Expectations

Central banks around the world are finally taking inflation seriously and making tough choices to combat it. According to overnight data, US inflation expectations remain high at 3.6%, with consumers fearing job losses more than ever before. The New York Fed's August consumer inflation expectations survey found that expected price growth for petrol rose to 4.6% and for food to 5.3%. Worries about the labor market intensified, with those surveyed seeing unemployment will be higher in a year now at 44%, the highest level since April 2020.

China posted a strong trade result for August, with exports and imports up strongly, resulting in a fatter trade surplus of $119 billion. Germany's July trade surplus also widened to €21.3 billion, despite a decline in exports from June. In Australia, consumer sentiment is retreating due to higher fuel and rate rise fears.

The Reserve Bank of Australia (RBA) deputy governor Andrew Hauser acknowledged that inflation is the major problem for Australia's central bank and that interest rates could rise higher in the coming months to fix the key inflation problem.