LONDON - Big central banks are closing in on the end of their rate hiking cycles, starting to surprise markets as their outlooks on when and how they will cease monetary tightening diverge.
The U.S. Federal Reserve held interest rates steady at 5.25%-5.50% on Wednesday but said rates may rise again this year to contain inflation. Sterling fell sharply after the move and interest rate futures showed traders believe there is a 70% chance the BoE will leave rates unchanged in November, compared with around 50/50 before the decision.Bank of Canada Governor Tiff Macklem said on Sept. 7 that monetary policy may not be tight enough to return to target.
Core inflation unexpectedly declining to 6.3% in August had boosted expectations that Thursday's hike would have been Norway's final one. But underlying price growth is still well above the bank's 2% target and now seen at 4.7% next year, higher than the Norges Bank previously expected.Sweden's central bank raised its key policy rate by 25 bps to 4% on Thursday, as expected, and said more tightening may be needed to bring inflation back to 2%.
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