Interest rates start to fall in Europe as the Fed lags

Prices at the Pumps - May 8, 2024 #saltwire #pricesatthepumps #gaspricesLONDON - Global central banks that moved together to battle inflation are starting to scatter, with European rate setters turning dovish while the U.S. Federal Reserve stays cautious about cutting too soon.

Consumer price increases have slowed to just over the 2% target as the Swedish economy stumbled under the pressure of high rates. The Riksbank's next dilemma is the weak crown and the potential for higher import costs to re-stoke inflation.The European Central Bank is widely expected to lower rates in June, with inflation close to its 2% target and growth tepid. Markets anticipate almost three cuts this year.

Bailey said the BoE still needs to see more evidence that inflation - running at 3.2% in March - will stay low before cutting rates. Markets expect the first reduction in August.The Fed has kept rates in the 5.25% to 5.5% range since July 2023. It held rates steady on May 1 and soothed some fears, following hot inflation readings, that its next move would be another hike.

That stance is because of a robust economy and core inflation, last reported at 4.5%, far exceeding its 2% target.

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