Deep Dive: Did central banks get it right in 2023?

investmentweek.co.uk:

While markets have begun pricing in rate cuts from key central banks in 2024, it is 'clear that higher interest rates are here to stay'.

Jumana Saleheen, chief economist at Vanguard Europe, said that although the global economy proved to be «more resilient than many expected in 2023, we expect monetary policy will finally begin to bare its teeth next year».

«Central bankers will certainly hope so,» she said.

'A tough call': Bank of England dovish move signals 'higher for longer' rates policy

The majority of central banks pursued a policy of continuing interest rate hikes in the first half of the year before moving to a pause in H2, in a bid to achieve a soft landing of the economy and avoid tipping it over into recession.

The Federal Reserve held rates 5.25%-5.5% at its June meeting — still a 22-year high — with the European Central Bank following suit in October at 4% and the Bank of England in November, pausing at 5.25%.

Colin Graham, multi-asset fund manager at Robeco, said that, with hindsight «you could argue that many developed market central banks were a little late in starting the rate hiking process last year».

Indeed, Isabel Schnabel, a member of the European Central Bank's executive board, said in a speech in May that most central bankers had been late to hike rates and had «underestimated the possibility of a return of persistent high inflation».

"[This] affected our monetary policy actions and shaped firms', households' and investors' expectations. Central banks need to reflect on how such factors may have contributed to the build-up of financial fragilities," she said.

BoE's Haskel: Rate cuts will not happen 'anytime soon'

But Graham argued investors could «cut the central banks some slack», especially