Economic Update – Wrong Footed

Interest rates continue to dominate both economic and investment discussions with the Reserve Bank of Australia (RBA) wrong footing the bond markets with a rate hike in May, and the US Federal Reserve (Fed) also raising their official rates. The European Central Bank (ECB) and the Bank of England (BOE) are expected to follow at their forthcoming meetings. Tightening cycles are nearing an end and major central banks are expected to move to the sidelines for a pause to wait and see.

Despite the rapid rise of interest rates to combat strong inflationary pressures, none of the above-mentioned central banks has yet raised its official cash rate above the current core inflation rate. Real negative interest rates persist in each economy, some greater than others.

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