Central Banks Grapple with Inflation and Policy Divergence

Global central banks are facing mounting challenges as inflationary pressures ease but divergent views on monetary policy persist. The president’s criticism of the central bank chair has fueled expectations of a dovish shift, particularly following the chair’s departure in May. Meanwhile, the Bank for International Settlements (BIS) warns that households, still scarred by the pandemic, expect prices to rise sharply in the coming year.
Andrew Bailey, the Bank of England governor, highlights lower labor demand and predicts a significant decline in wage growth, while US central bank officials remain divided over the impact of Donald Trump’s tariffs on inflation. Some, like Chris Waller, argue that no inflation “shock” has materialized, while others express concerns over higher inflation risks.
The Federal Reserve maintains that the economy remains solid but acknowledges that tariffs could push up prices. In Europe, the French central bank governor suggests further easing remains possible as underlying inflation outlooks remain unchanged. Meanwhile, investors are turning to alternative models amid concerns over data reliability and geopolitical tensions.
Central banks worldwide struggle to convey a clear sense of direction as key indicators fluctuate, heightening uncertainty ahead of pivotal meetings.

Published: 6/29/2025