Fed stands alone as ECB, BoE stick with tight policy

The US Federal Reserve was left in a camp of its own on Thursday when a host of Europe’s central banks stuck to plans to keep policy tight well into next year, dashing any hope that the Fed’s pivot towards rate cuts marked a global turning point. Extending the hawkish stance that has dominated global central banking through two years of excessive inflation, the European Central Bank said policy easing was not even brought up in a two-day meeting, the Bank of England said rates would remain high for “an extended period,” and Norway’s central bank even hiked rates. The hawkish stance came just hours after Fed Chair Jerome Powell said rate hikes were likely over in the US and lower rates were coming into view, with 75 basis points worth of cuts expected by policymakers next year, comments that bolstered rate cut bets on both sides of the Atlantic. “We’ve seen a rather remarkable divergence in central bank communications,” Matthew Ryan, head of market strategy at financial services firm Ebury, said. “While the ECB and Bank of England hold the line, and indicate that lower rates remain some way off, the Federal Reserve has actively encouraged markets to pencil in a more aggressive pace of US policy easing.” ECB President Christine Lagarde batted back any suggestion of an ECB pivot, making the case for a plateau at least until more definitive wage data come into view, probably next spring.