CAPP Macro: By 2027, U.S. Federal Reserve policy may diverge from the European Central Bank and the Bank of England

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ME News: On July 28 (UTC+8), Neil Shearing, an economist at Cаpital Economics, said in a report that although the market reflects expectations that the Federal Reserve, the Bank of England, and the European Central Bank will raise rates by slightly more than 50 basis points by mid-2027, the policy path may diverge by next year. He said that if the Iran war ends, energy prices will fall and domestic economic fundamentals will become the main driver of monetary policy. However, underlying inflation pressure in the UK and the euro area is weaker. The US is different: its fiscal policy also remains relatively accommodative. Shearing said it is becoming increasingly difficult to justify the market’s expectations for tightening by the ECB and the Bank of England, though the Federal Reserve may resume a tightening policy soon. (Source: Jin10)
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