Headlines

• The Federal Reserve, European Central Bank and Bank of England are all expected to raise rates again in the first week of February, with the impact of last year’s hikes still working its way through each economy
• Quantitative tightening by all three central banks will also contribute to tighter financial conditions this year
• Uncertainty over the impact of quantitative tightening on financial conditions and growth makes it more difficult for central banks to determine the terminal rate needed to restore inflation to target
• With their reputations at stake, we believe central bankers are more likely to tighten too much than too little in 2023

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