Dispersion in central bank behavior - No one size fits all

Everyone focuses on Fed activity, but there are growing policy differences and opportunities in other countries. Looking at June monetary policy changes and focusing on larger market, there are clear differences in central bank responses to inflation. We are not counting central banks that have announced no changes. Differences in policy mandates are now leading to increased rate differentials. 

Central banks in countries where foreign capital flows are more sensitive to real rates are showing a strong and quicker response to inflation surges regardless as to whether they are transitory than G7 countries. While this may not put any pressure on the Fed, it does offer investors with a focus on EM a chance to find potential carry and flow trades. The interaction between real rates, exchange rates, inflation, and capital flows can be complex; however, these central banks all desire to stabilize and manage current inflation.