Fed to Join Bank of England in Warning Against Complacency

Although the Bank of England kept interest rates unchanged, it reminded traders and investors on Thursday that they had been underestimating the probability of a hike this year. This is similar to the approach that the Federal Reserve used effectively six months ago, and that it may return to after next week’s Open Market Committee policy meeting.

Whether it is for the U.S. or for Europe, predicting central bank policy actions is tricky, given today’s unusual mix of economic, geopolitical and economic fluidity. There are important questions about how economies behave, from the relationship between inflation and unemployment to the evolving determination of productivity and wages. Geopolitical concerns come and go, particularly North Korea’s periodic missile threats. Meanwhile, domestic politics on both sides of the Atlantic has struggled for years to fully step up to economic governance responsibilities and, in the case of the U.K. and the European Union, clarify the future regional architecture.