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European stocks rose as the US reported slower-than-expected inflation, indicating that the Federal Reserve may lower interest rates later this year. The Stoxx Europe 600 Index increased by 1.1% in London, with real estate and technology sectors leading the gains. The Federal Open Market Committee is expected to keep its benchmark rate steady, but there is uncertainty regarding officials' projections for the rest of the year. The European Central Bank has already cut rates, and attention has shifted to political risks, particularly in France. Rentokil Initial Plc saw a 14% increase in its stock after activist investor Nelson Peltz's Trian Fund Management LP acquired a significant stake in the company. [Extracted from the article]

European stocks experienced a boost after the US reported lower-than-expected inflation, leading traders to believe that the Federal Reserve may lower interest rates later in the year. The Stoxx Europe 600 Index rose by 1.0% in London, with real estate and utilities leading the gains. The Federal Open Market Committee is expected to keep its benchmark rate steady, but there is uncertainty regarding officials' projections for the rest of the year. The European Central Bank has already cut rates, but the focus has shifted to political risks, particularly in France. [Extracted from the article]

Policy makers wrote that a likely extension of tightening with a smaller increase in June was appropriate to bring inflation expectations to target, according to the minutes of the May 3-4 rate-setting meeting, when the board raised borrowing costs by a full percentage point. (Bloomberg) -- Brazil's central bank said much of the impact of its "intense and timely" cycle of interest rate hikes is still to come even as it left the door open to smaller borrowing cost increases amid a tough inflation outlook. Brazil's central bank is also weighing more challenging global outlook, as the US Federal Reserve raises its borrowing costs. [Extracted from the article]

To the central bank's credit, it did make a hawkish pivot in April that saw economists and swap markets factor in a rate hike in June -- when the monetary policy committee is due to meet next. The Reserve Bank of India stunned the markets Wednesday with its 40 basis point rate increase and a move to suck out billions from the banking system. [Extracted from the article]

(Bloomberg) -- India's monetary policy will remain accommodative even if borrowing costs start rising this year, according to a dovish member of the central bank's rate-setting body, because the banking system is awash with liquidity and positive real rates are still a long way away. That mirrors the view of her rate panel colleague and also its most hawkish member, Jayanth Rama Varma, who in a separate interview said the main repurchase rate can climb now to counter inflation, although a return to positive real rate is many meetings away. [Extracted from the article]

(Bloomberg) -- The Philippine central bank may consider raising its key interest rate in June, Governor Benjamin Diokno said. Read: Philippines Watching U.S. on Rate Move, Finance Chief Says Consumer-price rise will average within BSP's target range next year after a possible breach this year, Diokno said. [Extracted from the article]

Riksbank Governor Stefan Ingves gave the strongest signal yet that the Swedish central bank is preparing for a policy shift that could entail a series of interest-rate hikes. In the interview, Ingves noted that companies as well as households are "probably more sensitive than ever" to rate hikes, adding that means monetary policy changes may have a larger impact than previously. [Extracted from the article]

"There is an increasing risk that expectations of elevated inflation could become entrenched", the Ottawa-based central bank said in its rate statement, adding it will "use its monetary tools to return inflation to target and keep inflation expectations well-anchored." (Bloomberg) -- The Bank of Canada raised its policy rate by half a percentage point in its biggest hike in more than two decades, and said it would stop buying government bonds to shrink its balance sheet as it moves aggressively to wrestle inflation down from a three-decade high. [Extracted from the article]

The monetary policy committee raised the bank's benchmark rate by a cumulative 75 basis points to 4.25% since November to tame rising inflation, unwinding some of 2020's extraordinary monetary policy stimulus that was aimed at shoring up an economy ravaged by the coronavirus pandemic. (Bloomberg) -- South Africa's central bank warned that mounting price pressures stemming from the war in Ukraine risk de-anchoring inflation expectations as it announced the first full overhaul of its monetary policy implementation system in almost a quarter century. The central bank also said it aims to introduce a new monetary policy implementation framework this year, switching to a surplus system from the deficit mechanism that's been in place since 1998. [Extracted from the article]

(Bloomberg) -- The Indian central bank's unexpected signal that it's heading toward exiting easy monetary policy is prompting some economists to revise their outlooks on the timing and number of rate hikes this year. India has two policy objectives of safeguarding growth and controlling inflation and two instruments -- fiscal policy and monetary policy -- to achieve that, HSBC economists led by Pranjul Bhandari wrote in a report to clients. [Extracted from the article]

(Bloomberg) -- Federal Reserve Bank of St. Louis President James Bullard said monetary policy benchmarks using "generous assumptions" suggest that the U.S. central bank may need to raise interest rates to about 3.5% to counter inflation that's running far too high. The Fed raised its benchmark overnight rate by 25 basis points last month to a target range of 0.25% to 0.5% with Bullard, who favored a half-point increase, the lone dissenter. [Extracted from the article]

ECB President Christine Lagarde said the ECB will take a gradual approach to raising rates. (Bloomberg) -- European bonds slid, led by shorter maturities, as traders bet hotter-than-expected inflation readings will force the European Central Bank to end its era of negative rates sooner than previously anticipated. [Extracted from the article]

(Bloomberg) -- Chile's central bank raised its key interest rate by 150 basis points for the second straight meeting, resisting calls for an even larger hike as the economy slows and signaling smaller increases in coming months. The central bank will publish updated forecasts on inflation and GDP in its quarterly monetary policy report early Wednesday. [Extracted from the article]

-- Adriana Dupita, Latin America economist Inflation Target Campos Neto also dismissed speculation that policy makers would modify Brazil's inflation targets to accommodate recent price shocks. (Bloomberg) -- Brazil's central bank president signaled aggressive interest rate hikes will end in May, prompting investors to dial back bets on a longer monetary tightening cycle. [Extracted from the article]

The implied policy rate path of the central bank's quarterly projection model, which the monetary policy committee uses as a guide, now indicates a key rate of 5.06% by year-end, compared with its January forecast of 4.91%. The bank increased its key interest rate by 25-basis points, the third such move since November, continuing to unwind some of 2020's extraordinary monetary policy stimulus that was aimed at shoring up an economy ravaged by the coronavirus pandemic. South Africa's central bank lifted its benchmark interest rate for a third straight meeting and signaled it will raise borrowing costs more aggressively through 2024, in part to counter inflationary pressures stemming from Russia's war with Ukraine. [Extracted from the article]

(Bloomberg) -- Hopes for a soft landing for the U.S. economy are fading in the bond market. The eurodollar futures curve -- a proxy for the direction of the Fed's policy rate -- shows a peak in June of next year, followed by the equivalent of almost two 25 basis point rate cuts by December 2024. [Extracted from the article]

(Bloomberg) -- The European Central Bank shouldn't postpone increasing interest rates from record lows if inflation demands it, and may be able to start doing so in 2022, according to Governing Council member Joachim Nagel. But the ECB is trailing other big central banks in raising interest rates, with hikes by the Federal Reserve and the Bank of England already underway. [Extracted from the article]

Traders are adding bets on an outsized interest-rate increase in South Africa later this month as the surge in the price of crude oil fuels inflation expectations. Forward-rate agreements kicking in after the next monetary policy committee meeting on March 24 are pricing in a rate increase of 41 basis points, or an 82% chance of a 50-basis-point hike, compared with 32 basis points two weeks ago. [Extracted from the article]

The Bank Rate is the benchmark for all interest rates within the country's financial sector, with the central bank holding six monetary policy meetings a year. Other changes include introducing an interest-rate corridor -- with a new standing deposit facility at 100 basis points below the monetary policy rate and a standing credit facility 100 basis points above -- and commercial banks will be able to set their own prime lending rate. Botswana's central bank plans to revamp how it manages interest rates, shifting to using the yield on the main monetary operations instrument as the anchor policy rate instead of the official Bank Rate. [Extracted from the article]

The Reserve Bank's Monetary Policy Committee lifted the official cash rate by 25 basis points to 1% Wednesday, as expected by most economists. (Bloomberg) -- New Zealand's central bank raised interest rates for the third straight meeting and signaled more to come to contain inflation. [Extracted from the article]

The central bank left its key interest rate steady last week at 2%, while hinting it could start exiting pandemic-support measures when the economic recovery becomes sustainable or inflation risks rise significantly. Diokno Says Philippines Has "Room to Maneuver" on Rate (Bloomberg) -- The Philippines still has "room to maneuver" on monetary policy as the country's inflation outlook "looks good", central bank Governor Benjamin Diokno said Monday. [Extracted from the article]

"Poland can't afford to stop lifting key interest rates", Kotecki told Bloomberg News in his first interview as a central bank policy maker. (Bloomberg) -- Poland has no alternative to aggressive monetary tightening as the government's actions to control rising prices may only stoke further inflation, a new central bank policy maker said. Yields on two-year zloty government notes jumped four basis points following his comments, which came six days after the central bank lifted the key rate for a fifth straight meeting. [Extracted from the article]

(Bloomberg) -- Poland has no alternative to aggressive monetary tightening as the government's actions to control rising prices may only stoke further inflation, a new central bank policy maker said. "Poland can't afford to stop lifting key interest rates", Kotecki told Bloomberg News in his first interview as a central bank policy maker. [Extracted from the article]

(Bloomberg) -- Indonesia's central bank kept borrowing costs unchanged to maximize support for the economy before its U.S. counterpart begins tightening monetary policy. While inflation in Indonesia remains modest, the Federal Reserve's looming rate hikes risk spurring heavy sell-offs that have destabilized Indonesia's currency and bonds in the past. [Extracted from the article]

The six-member rate panel, which has been on pause since August 2020, retained its accommodative policy stance, Das said, signaling the economy needed continued support despite accelerating inflation. (Bloomberg) -- India's central bank kept borrowing costs at a record-low for a 10th straight meeting, complementing fiscal aid to ensure the economy's durable recovery from the pandemic. [Extracted from the article]

Officials caught many investors off guard last week by signaling a faster-than-expected pace of rate increases, spurring a rapid repricing in rate-hike wagers and bruising bond holders. (Bloomberg) -- A relief rally spread across the world's biggest government bond markets on Wednesday after yet another policy maker from the European Central Bank pushed back against traders betting on a rapid pace of interest-rate hikes this year. [Extracted from the article]

Iceland's central bank delivered its biggest interest-rate hike since the 2008 crisis, trying to quell inflation spurred by a rampant housing market. The Monetary Policy Committee in Reykjavik lifted the seven-day term deposit rate by 75 basis points to 2.75%, the highest level in almost two years. [Extracted from the article]

The Monetary Policy Committee in Reykjavik lifted the seven-day term deposit rate by 75 basis points to 2.75%, the highest level in almost two years. Iceland's central bank delivered its biggest interest-rate hike since the 2008 crisis, trying to quell inflation spurred by a rampant housing market. [Extracted from the article]

(Bloomberg) -- India's central bank is set to stick with baby steps to policy normalization, as it is seized by the need to anchor borrowing costs for the government in addition to supporting a durable recovery in Asia's third-largest economy. The Reserve Bank of India will instead likely raise the reverse repurchase rate to cut down inflation-inducing liquidity in the banking system -- a signal that it's committed to return policy to pre-pandemic settings. [Extracted from the article]

"Negative bund yields are going to be a memory soon", said Althea Spinozzi, senior fixed-income strategist at Saxo Bank A/S. She's planning to raise her year-end forecast for two-year German yields to about 0.1% after the ECB turned more hawkish on Thursday. (Bloomberg) -- Negative yields might be a thing of the past if ever-bolder market bets on monetary policy normalization pay out. Meanwhile, Australia's 10-year yields jumped 9 basis points after the country's central bank upgraded its inflation and employment outlook. [Extracted from the article]

Two-year overnight-indexed yen swaps this week breached zero for the first time since 2016 -- the year the Bank of Japan introduced its negative interest rate policy. (Bloomberg) -- Speculation of monetary policy normalization has reached Japan. [Extracted from the article]

"If central bank rates alone were increasing [rates], but quantitative easing was staying in place, this would provide at least some liquidity support to asset prices", said Freya Beamish, head of macro research at TS Lombard. Markets are betting the Bank of England will lift rates on Thursday to the level it has said it may begin shrinking its portfolio. [Extracted from the article]

That sets the scene for a divergence as major central banks in the English-speaking world look not only to stop quantitative easing but begin quantitative tightening, the term given for shrinking balance sheets, while others keep on easing monetary policy. "If central bank rates alone were increasing [rates], but quantitative easing was staying in place, this would provide at least some liquidity support to asset prices", said Freya Beamish, head of macro research at TS Lombard. [Extracted from the article]

Now, Goldman expects the BOE will stop re-investing the proceeds maturing bonds starting in February and to begin selling assets after rates hit 1%. (Bloomberg) -- Goldman Sachs Group Inc. expects the Bank of England to raise interest rates three times this year, a move that would mark the quickest tightening in a quarter century. [Extracted from the article]

Aggressive Hike The aggressive rate hike signals fresh concerns over the ability to tame Chile's fastest annual inflation in 14 years amid record economic growth. Chile's peso jumped on Thursday after the central bank unexpectedly delivered its biggest interest rate hike since 2001 and signaled borrowing costs will continue to rise higher than many investors had forecast. [Extracted from the article]

Read More: Chilean Consumer Prices Surprise Again as Economy Booms What Bloomberg Economics Says "The bigger than expected rate hike on Wednesday's meeting shows policy makers increasingly worried about lingering pressure on prices and growing risks to the inflation outlook. (Bloomberg) -- Chile delivered its biggest interest rate hike since 2001 in a shock decision and signaled borrowing costs will continue to rise higher than many investors had expected amid renewed urgency to drag inflation to target. [Extracted from the article]