With the US Federal Reserve almost certain to leave interest rates unchanged at its policy meeting later this month, the focus of central banker watchers has shifted to the other side of Atlantic.
The European Central Bank’s decision on whether to raise rates again at this week’s monetary policy meeting on Thursday looks finely balanced. There is less debate about the Bank of England, where a rate rise is rightly expected later this month but there is some possibility of a surprise pause.
Behind these near-term calls is a debate around how forward-looking monetary policy can afford to be at this juncture and how credible it is to substitute further rises with a policy of keeping rates high for longer. The issue is how such “high for longer” signalling would square with an approach that makes policy decisions data dependent and the desire of central banks to stay away from “forward guidance” on rates.