Long-term borrowing costs reached decades-long highs in four major markets, while the Central Bank of Iceland increased its rate to 8 per cent and Fed minutes revealed three votes for a hike.
The Central Bank of Iceland lifted its seven-day term deposit rate by 25 basis points to 8 per cent, citing elevated inflation and inflation expectations. This move marked the central bank's third rate increase this year. Ongoing price pressures across the country set the stage for policymakers to maintain their strict stance in monetary policy.[1]
While the US Federal Reserve held its policy rate between 3.5 per cent and 3.75 per cent, three policymakers voted for a rate rise. Meeting minutes showed that several participants called price pressures broad based and argued for a more restrictive stance. Most preferred to wait for further data. Staff figures put total PCE inflation at 4.1 per cent in May and core PCE at 3.4 per cent. Participants judged the unemployment rate largely unchanged.[2]
Long-dated government bond yields rose together in the United States, Japan, Germany and France. The US 30-year yield reached 5.286 per cent, its highest since 2007, while the 10-year sat near 4.71 per cent. Germany's 10-year yield reached its highest since 2011 and France's its highest since 2008. Investors pointed to growing budget deficits and renewed inflation. British 30-year gilts also approached their previous peaks.[3]
