Divergent monetary policies

A big 48 hours for global monetary policy. Three major central banks moved this week, and the divergence says a lot about where the world stands right now.

🇺🇸 Federal Reserve — HIKE (25bp → 3.75%–4.00%)

Chair Kevin Warsh delivered a rate increase since taking the helm, citing inflation that remains "sticky." His message: the Fed can't control individual prices like oil, but it can and will stop relative price shocks from broadening into the wider economy. True to form, Warsh again declined to submit his own dot on the Fed's projections and offered little new forward guidance. Despite being somehow discounted, markets moved as if they were surprised. Dollar, precious metals and bonds moved quite a lot but the direction is still not clear. The job is not done yet. October will tell us of this is a trend.

🇬🇧 Bank of England — HOLD (3.75%)

The MPC held rates in a 6-3 vote. UK inflation has climbed to 3.1%, driven largely by energy costs tied to the Middle East conflict — and the pressure to tighten is visibly building within the committee.

🇧🇷 Banco Central do Brasil — CUT (25bp → 13.75%)

In contrast, Copom delivered another cut, bringing total easing since March to 125bp, in the last policy decision before Brazil's presidential election. A very different playbook, reflecting a very different inflation trajectory.

The common thread? Energy prices from the ongoing Middle East conflict are the variable every central bank is wrestling with, just landing very differently depending on where each economy sits in its own cycle.

Want to know more? You can register for free at Fund@mental.

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning #policymistake #ratecut #stagflation