While some bumps in the road to a sustainable 2% inflation rate can be expected, the broader drivers of the inflationary surge in recent years have now largely dissipated

Governor Andrew Bailey noted there would likely be a need for rate cuts over the coming quarters and these could be to a greater degree than currently priced into market rates

The main focus this week will be on the upcoming Fed monetary policy decision

Energy price falls have been helping to reduce annual consumer inflation for much of the past year, but these base effects are likely to wash through the data very soon, and could even push up inflation once more if the recent trend in oil prices persists

Eurozone inflation has undershot expectations

Eurozone economy essentially flat-lined for five consecutive quarters between the end of 2022 and throughout last year

However, growth remains subdued in Europe and the risk of a downturn is still possible

While the Fed and Bank of England held rates as expected, the accompanying forecasts and commentary from key policymakers have helped to align futures markets with central banks

Markets are now pricing in just 70 basis points of rate cuts by the end of 2024, down from the almost nearly 100 basis points, or 1%, in cuts that were priced in only a couple of weeks ago

After around two years of aggressive interest rate hikes from the main central banks, monetary policymakers are still on hold and currently deploying a “data-dependent” approach in setting monetary policy.