The European Central Bank raised interest rates. Will the Fed follow? A quarter-point increase in baseline borrowing costs across the bloc came as officials warned of "upside" inflation risks and oil prices shot above $100 a barrel. Fed-funds traders are putting 64% odds that the Fed will do the same next week (arbitrage alert: the chances on Kalshi are a bit lower). But the ECB's only job is to manage inflation, while the Fed has a trickier dual task of managing both prices and employment, and so is keeping an eye on a labor market stuck in a "low hire, low fire" defensive equilibrium.
Global central banks would prefer to move their interest rates together to avoid warping investment flows and currency markets. (Back in 1986, a Fed compromise was struck to let Germany and Japan cut first.) The post-Covid responses to inflation and, now, slower growth have upset that lockstep instinct as central banks tend to their own economies.