Rising Global Yields May Substitute for Further Central Bank Hikes

Global bond yields have surged to multi-decade highs in the US, Europe, and Japan, prompting Fed officials and other policymakers to signal that tighter financial conditions could reduce the need for additional rate hikes. Swaps markets now price a global hiking cycle over the next 12 months, but the transmission of higher yields to policy decisions remains uncertain. This dynamic suggests a potential shift in central bank reaction functions, with implications for rate paths and growth.