The Fed left interest rates unchanged in its latest policy meeting in July but acknowledged that price pressures are subsiding. This could encourage the Fed to reduce interest rates later this year. Across the Atlantic, the Bank of England (BoE) implemented its first rate cut since early 2020 on abating inflation in the UK. In contrast, the Bank of Japan (BoJ) raised policy rates for the second time this year to control upward pressures on inflation.
“While the Fed refrained from cutting rates in July, we believe, falling inflation will give it sufficient confidence to reduce rates later in the year. This is likely to be positive for government bonds.”
- The Fed kept policy rates unchanged, but the BoE reduced rates in a sign of some divergences in monetary policies.
- We think inflation is progressing towards the Fed’s goal, leaving the door open for easing at its future meetings this year.
- Bonds may benefit from central bank rate cuts and falling inflation.
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