Inflation Remains Risk Confronting Financial Markets

July 27, 2023--Central banks may keep interest rates higher for longer than currently priced; given investors' benign inflation outlook and growing expectations for a soft landing, this could increase financial stability risks and weigh on growth
Overall inflation has moderated meaningfully in recent months in the United States and euro area, as energy and food prices have fallen significantly. Year-on-year headline inflation is now around 3 percent in the United States and below 5.5 percent in the euro area.

However, core inflation, excluding food and energy prices, has declined more slowly. Services inflation has proven to be particularly sticky.

According to market pricing, investors expect headline inflation to continue to decline quite rapidly in coming quarters. However, some market participants still see upside risks to the inflation outlook, likely reflecting recent stickiness in core inflation. Indeed, pricing from inflation options-financial instruments that offer protection against inflation moving higher or lower than its current level-shows that such upside risk is particularly pronounced in Europe, where investors assign roughly similar odds to inflation returning to the European Central Bank's 2 percent target and inflation remaining around 4 percent. In the United States, investors appear to put high odds on inflation being above target at around 3 percent.

Central Banks Drive $407 Billion ETF Surge as Industry Consolidation Accelerates

September 22, 2025-Global central banks have purchased over 1,000 tonnes of gold annually for the last three years, representing a dramatic acceleration from the 400-500 tonne average of the preceding decade, according to the World Gold Council[1].