The one word that markets are concerned with right now | Forexlive

The playbook this year was supposed to be simple. The disinflation process was to continue and that will lead to major central banks cutting interest rates by a couple of times. The US economy in particular was supposed to hold up well and allow the Fed some breathing room to work with as Powell & co. look to shore up economic conditions.

Instead, we’re starting to see recent data point to a flagging US economy. Meanwhile, it is Europe and the UK that have shown some resilience this year. That has bought the ECB and BOE some added time at least in navigating through their respective policies.

As for the disinflation process, we’ve sort of hit the brakes on that in the last one to two months. The good news is that we have seen price pressures fall over the past year across the globe. But the “easy” part was just that, in getting inflation down back to around 3%. The “hard” part is the here and now, in trying to bring that further back to around 2%.

Amid base effects and what not, major central banks are arguing that inflation will start to come down again in the latter stages of this year. It may happen but let’s not forget, policymakers never have a good track record in calling these things. Remember how adamant they were back in 2021 that all of this was supposed to be transitory? It’s now three years to that day.