2023: The Return of Central Bank Divergence

In a year that will go down as one of the biggest aggregate tightening in global policy rates ever, there has not been that much nuance in global fixed income. Pretty much every central bank has hiked over 250bps this year, and while the RBNZ and the Fed have gotten to higher levels, every central bank has ended the year with a policy rate that is miles away from what they were thinking was possible at this time last year. At this time last year, Lagarde was talking about 2022 rate hikes being entirely premature for the ECB and Lowe at the RBA was trying to enforce forward guidance that the RBA were still years away from hiking rates. Both central banks hiked rates more than 250bps this year. The point is, some hiked more and some hiked less, but 2022 was the year of broad central bank synchronization.