On Friday USA Non-Farm Payroll data indicated that 300,000 jobs were added to the economy during March 2024. This surprised investors, analysts and most of all Federal Reserve members. Post the release many brokerages reduced the number of cuts to 2 and the same happened in the Fed Rate swap market.
Whereas , ECB members in the same week communicated that it is not necessary for them to cut only after Fed. Bank of Japan has already entered the hiking phase.
These different directions Amon central banks and the actual vs estimates of data might indicate an uneven growth to continue in the near and medium term. The problem is not limited to them, even internally members of the monetary policy committee are differing on direction ahead.
The coming quarters might see the highest volatility among central banks and their members due to data direction. This could intensify further if commodity prices especially crude oil remain high and force inflation higher while economic growth remains stable.
The only two scenarios during which most central banks may align are first if the economy suddenly falls that would force everyone to start rate cuts. Second will be inflation globally rising further to an uncomfortable level where everyone delays the cuts to next year or this year's end and may look at hiking again. Both scenarios might have volatile reactions in financial markets.
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