If we look at the major central banks worldwide, it would appear that inflation is under control, and unemployment has not spiked, which for many suggests "immaculate disinflation". This scenario involves high inflation eventually being brought under control without what many would see as a natural increase in unemployment. However, this may not be the case worldwide.


Bank of Japan


Japan is the significant outlier regarding interest rates, with a long-awaited move back to positive rates. This was prompted by a strengthening economy that saw inflation hit 4.5% last year, against a rate of -1.2% in 2020. The rate currently stands at 2.8%, which has prompted the Bank of Japan to increase interest rates with a degree of confidence.


US Federal Reserve


At the start of the year, many analysts confidently predicted that we would see six interest rate reductions in the US during 2024. This very quickly fell to five then four, and more recently, analysts seem to have accepted that we will likely see three. Despite concerns by some academics, it would appear that US inflation is under control without having a significant impact on unemployment numbers – indeed, they have been stronger than even the most optimistic had hoped.


Bank of England


Andrew Bailey, the governor of the Bank of England, was surprisingly upbeat when releasing the latest MPC interest rate announcement. He suggested that a period of multiple interest rate reductions could begin as early as June, and markets are now more optimistic than at any point over the last decade. It would appear that an insistence on keeping interest rates relatively high has brought inflation back under control without significantly impacting unemployment numbers.


European Central Bank


At first glance, recent Purchasing Managers Index (PMI) data would suggest that the European Union is moving in the same direction as the UK and the US economies. However, on closer investigation, there are still concerns about wage growth and weak productivity, which is impacting services inflation. Consequently, there are concerns that the ECB is not yet able to follow the UK and the US in relatively aggressive interest rate reductions later in 2024.


Cost-of-living crisis


While the overriding economic situation may be improving in numerous parts of the world, on the ground, many are still struggling with a cost-of-living crisis. This is an issue which will take some time to filter through the system, with the cost of goods and services heavily impacted by recent double-digit inflation in places such as the UK. While appreciative of the need for short-term pain for long-term gain, how much longer will the short-term pain continue?




It would be a considerable understatement to say it has been a long road back to "normal" economic conditions. Whether some economists are a little ahead of the game by suggesting that "immaculate disinflation" is in reach remains to be seen. However, if there is one thing we've learned in recent years, it is to take nothing for granted; you just never know what might be around the corner.

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