Global Central Bank Officials Signal Rate Hikes Ahead but Urge Measured Pace After Hot US Inflation Data

A wave of central bank commentary from three major economies converged on October 15 after hotter-than-expected US inflation data rattled markets the day prior. Wall Street sold off sharply on Wednesday, sending the S&P 500, Dow and Nasdaq lower, while two-year Treasury yields jumped 12 basis points to 4.90% as traders priced a roughly coin-toss probability of another Federal Reserve hike.

Fed San Francisco President Mary Daly said in an exclusive Reuters interview that rate hikes are likely needed but not urgently, a stance that echoes the broader Fed posture signaled in recent minutes, which indicated most officials expect another increase by year-end without committing to a specific meeting. Markets had already largely ruled out an October move, with December seen as the more probable window.

Bank of England Chief Economist Huw Pill offered a similar message for the UK, saying a rate hike need not be the start of a long series of increases, a signal intended to reassure markets that tightening would be measured rather than open-ended. Across the Pacific, a Bank of Japan policymaker cautioned against being overly cautious on rate hikes, pushing back on the view that the BOJ should hold back indefinitely as it edges away from its ultra-loose policy framework.

Japanese government bond yields fell to more-than-one-month lows on Thursday as investors sought safe-haven assets in the wake of the Wall Street selloff, underscoring how the US inflation shock rippled quickly into global fixed income markets.