Surprisingly strong US manufacturing data and an acceleration in price rises in Europe reinforced expectations that central banks will take interest rates higher, and keep them there longer.
US bond yields have risen sharply in February, and dragged global rates higher, as upbeat economic data fuelled expectations the central bank will raise borrowing costs more aggressively to contain still-sticky inflation. Bond traders also lifted expectations of a higher peak in the policy rate, implying a top of 5.5 per cent by September, up from 5.4 per cent earlier in the week.
On an annual basis, EU-harmonised prices accelerated 9.3 per cent, from a year ago, against forecasts of 9 per cent, and above January’s 9.2 per cent increase. The surprise figures came a day after two of the eurozone’s biggest economies – Spain and France – also posted unexpected rises, pushing up European Central Bank rate expectations.Financial markets sharpened speculation the ECB has more work ahead, implying 1.5 percentage points of increases to 3.9 per cent, up from 1.
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