BNY warns: Lack of substantial US-Iran agreement boosts global inflation expectations, Fed tightening will force central banks worldwide to follow suit
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(1) Bob Savage, Head of Macro Strategy at Bank of New York, stated that in the absence of a substantial agreement to end the US-Iran conflict, global inflation expectations continue to rise, which is very likely to lead to interest rate hikes by the Federal Reserve and other central banks. Even if not yet actually enacted, just the expectation that the Federal Reserve will shift toward tightening marks a qualitative change in global policy outlooks. (2) Savage pointed out that most central banks around the world may need to align their wording with the Federal Open Market Committee, otherwise they will face the risk of the interest rate spread against the US dollar widening. Under circumstances where dollar-priced commodities have already created inflation risks, such a widening spread will further generate imported inflationary pressure.
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