2 May: ‘Higher-For-Longer’ Narrative Sinks Deeper Roots
The US Federal Reserve has kept interest rates in a target range between 5.25% and 5.5% and signalled that borrowing costs are likely to remain higher for longer, as it continues to grapple with stubborn inflation across the world’s largest economy, writes Andrew Michael.
The Fed’s rate-setting Federal Open Markets Committee said yesterday that “inflation has eased over the past year” but admitted that “in recent months, there has been a lack of further progress towards the Committee’s 2% inflation objective”.
In the US, annual inflation recently reversed a downward trend and now stands at 3.5%. This compares with 3.2% in the UK, its lowest level in more than two years, and 2.4% across the eurozone.
So far this year, buoyant economic data from the US, such as stronger-than-expected employment figures and positive corporate earnings news, has dented the Fed’s inclination to press on with expected interest rate cuts.
The Fed, Bank of England and European Central Bank share a common target in trying to maintain long-term inflation at 2% across their respective economic blocs.
Although central banks worldwide have been successful over the past year or so in suppressing soaring prices and bringing down inflation levels from at or near double-digit levels, the last part of their collective challenge has met with resistance.
Next Thursday, 9 May, the Bank of England…
