Odd Lots Why Interest Rates Are Shooting Up All Around the World
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May 22, 2025 
Steven Englander, the global head of G-10 FX research at Standard Chartered, dives into the recent surge in global interest rates, particularly highlighting the spike in Japanese government bonds. He discusses how a weakening dollar impacts the U.S. economy and dissect the complex dynamics of fiscal policies. The conversation touches on the 'sell America' narrative, investor concerns in uncertain markets, and the challenges central banks face during stagflation. Englander emphasizes the need for innovative approaches to tackle these economic hurdles.
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Fed Bears Inflation Control Burden
- Fiscal expansion amid higher deficits likely places full inflation control responsibility on the Fed.
- Political difficulties and rising deficits complicate reducing government spending to manageable levels.
Fed Rate Cuts: Narrow and Cautious
- The Fed may cut rates cautiously as growth slows but must watch tariff inflation and fiscal stimulus effects.
- Premature cuts risk forcing rate hikes again if inflation worsens, narrowing the easing window.
Challenges of Stagflation for Central Banks
- Central banks struggle to manage stagflation due to limited tools and negative productivity shocks.
- The key difficulty is deciding how quickly to reduce inflation without harming economic output excessively.