Major central banks are the monetary authorities of the world's largest developed economies, including the Federal Reserve, the European Central Bank, the…
Major central banks are the monetary authorities of the world's largest developed economies, including the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan, and they set the interest rates that shape borrowing costs, currencies and bond markets worldwide. This week showed just how unsettled that process has become.
In Brief
- The Federal Reserve held rates steady but rattled bond markets when Chair Kevin Warsh gave no hints on future moves.
- The Bank of England kept its rate at 3.75%, though a third of policymakers wanted a hike.
- The Bank of Japan meets Friday facing pressure from a weak yen and rising inflation risk.
- The Reserve Bank of Australia holds the highest G10 policy rate at 4.35%.
- The Swiss National Bank remains at 0%, the lowest among developed economies.
Why the Fed Decision Shook Bond Markets
The Federal Reserve left its benchmark rate unchanged on Wednesday, but the reaction in bond markets was anything but calm. Chair Kevin Warsh reaffirmed a firm commitment to bringing inflation down, yet he offered no real signal on where rates go next. That silence spooked traders, who dumped longer dated Treasuries and pushed the 30 year yield to its highest level in 19 years. The yield curve steepened sharply as investors weighed whether the Fed has done enough to control prices. President Donald Trump, who picked Warsh for the role and called him