Central Banks Shift Gears: Restrictive Policy Takes Hold Amid Volatility

Central banks have shifted their policy from accommodative to restrictive in the last six months, driven by rate increases and revised forward guidance. The European Central Bank raised its policy rate by 25 bps to 2.25% on June 11, reflecting higher inflation expectations.

The US Federal Reserve has confirmed Kevin Warsh as its new chair, who emphasized price stability in his first FOMC meeting but noted pressure on inflation, output, and employment trends. The market consensus is that rates will remain steady or increase later this year.

Energy commodity price volatility remains a concern due to the US-Iran conflict, but experts expect normalisation if tensions ease. Corporate deal volume has been high and driven by large transactions, with several large IPOs and robust secondary offerings.