Back
~
2
min read
· Posted on
February 21, 2024

Central banks around the world have slowed down the rate rises.. but it ain't over red rover

Central banks around the world such as the Federal Reserve in the US and the European Central Bank have slowed their rate rises.

What's the key learning?

  • The Federal Reserve in the US slowed its rate rise to 0.5% and the Bank of England and the European Central Bank followed suit the next day.
  • With inflation on the way down in the UK and Europe, the investment world is hoping that this is the last rate rise in a little while.
  • Goldilocks economy: Just like Goldilocks wants to find a bed, chair, or bowl of porridge that is "just right," central banks want to find the right balance of inflation and economic growth.

👉 Background: In Australia and around the world, central banks have been hiking interest rates like they’ve been going out of fashion. The main goal? Combat that pesky, rising inflation which has caused some major cost of living pain.

👉 What happened: And last week, three big central banks made very similar moves:

👉 What else: This means the cash rates are at their highest levels since 2008. But with inflation supposedly on the way down in the UK and Europe, the investment world is hoping that this is the last rate rise in a little while.

What's the key learning?

💡Welcome to the Goldilocks economy. Just like Goldilocks wants to find a bed, chair, or bowl of porridge that is "just right," central banks want to find the right balance of inflation and economic growth.

💡We know that central banks are desperately trying to avoid sending their economies into recession.

  • If inflation is too high (as it has been), it’s kinda like the bed that's too hard for Goldilocks.
  • If inflation is too low, it can be like a bed that is too soft for Goldilocks.

💡And while some economists and central bankers believe inflation in these regions may have peaked, it’s hard to know whether they’ve hit the sweet spot yet.

Ready to win at money?

Sign up for Flux and join 100,000 members of the Flux family

A button to App StoreGoogle Play store button
Excellent  4.9 out of 5
Star rating