CITI’S TAKE
Our global central bank monitor highlights that monetary policy has shifted from broad easing last year toward a tightening bias this year. Central banks have been hesitant to reprise their post-pandemic strategy of “looking through” an evolving supply shock. Accordingly, we now expect 12 of 27 major central banks to hike, 7 to stay on hold, and the remaining 8 to cut. In contrast, when the year began, we saw 17 cutting rates, 9 on hold, and just one hiking (the BoJ). Although this more muscular stance risks “overlearning” the lessons of the pandemic episode, the market’s response following the Fed’s recent meeting highlights the importance of central banks framing their policies and communication toward convincingly achieving their inflation targets.
