For much of 2023, inflation in advanced economies has persisted well above central bank targets. Rapid inflation in services and tight labour markets led to further increases in policy rates along with expectations that these rates would remain at comparatively high levels for a prolonged period. However, the more recent retreat in inflation (down to 3.5% yoy for advanced economies in October) and commentary from central bankers has substantially shifted expectations. At the time of writing, five policy rate cuts by both the US Fed and European Central Bank were fully priced for 2024, with a high probability of a ... (full story)