Why central banks are unlikely to repeat their 2022 response: interview with Samy Chaar

Article published in L’Echo on 16 June 2026.

The week ahead is set to be a busy one for financial markets on the monetary policy front. A number of central banks, including the Bank of Japan (BoJ), the US Federal Reserve (Fed), and the Bank of England (BoE), will review their policy rates over the coming days.

Following the European Central Bank’s (ECB) announcement of its first rate increase since 2023 last Thursday, should investors be preparing for a renewed tightening of monetary policy? No, says Samy Chaar, Chief Economist at Swiss private bank Lombard Odier. He points in particular to the absence of inflationary pressure from wages, unlike the situation seen in 2022.

Last week, the European Central Bank (ECB) cited rising inflation to justify its rate increase. Do you agree? Should investors be concerned about an inflation shock?

The rise in inflation is entirely due to energy prices. If you look at the other components of inflation, they remain within a perfectly normal range, not far from their historical averages. So we are facing a highly concentrated form of inflation that is not spreading throughout the wider economy.

Now that the United States and Iran have reached an agreement, and oil prices have moved sustainably below USD 100 per barrel, this increase in prices should fade away, bringing us back to where we started, with inflation around 2%.

Now that the United States and Iran have reached an agreement, inflation should return to around 2%

Some economists have compared the current situation to 2022, at the start of the war in Ukraine, or even to the oil shocks of the 1970s. What is your view?

There is indeed one almost identical element, namely an energy price shock. In that respect, those historical precedents are useful from a statistical perspective.

However, there is a major difference between today and either 2022 or the 1970s. In reality, there are two sources of inflation within an economy. The first is the external component, typically linked to commodities, food products, energy, and so on.

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But there is also a second driver of inflation: endogenous, or domestic, inflation. This is often linked to the labour market and wage growth. If people earn more, they are more likely to go out to restaurants or take holidays. That, in turn, generates inflation in the services sector.

What happened in 2022, and also during the 1970s, was that wages were rising strongly. Combined with the energy shock triggered by the war in Ukraine, both inflation engines were running at full speed in 2022. Central banks therefore had to respond very aggressively.

Today, that is not the case at all. Yes, one of the two drivers – energy – is active. But the second inflation driver, linked to employment and wages, remains very subdued. We are not seeing the kind of wage growth experienced in 2022. In that sense, today’s inflation is less widespread and therefore less concerning for central banks.

So there is no reason for central banks to raise policy rates?

That is how I see it, although that does not necessarily mean they will act accordingly. In my view, because the situation differs from that of 2022, central banks should respond differently.

In 2022, central banks were completely caught off guard. Policy rates were extremely low, while both inflation drivers – energy, due to the war in Ukraine, and post-pandemic wage growth – were running at full speed.

Today, policy rates are significantly higher. As a result, I believe central banks will react less forcefully to the energy shock. I do not expect the Federal Reserve to raise rates this year.

The Fed’s decision-making body, the FOMC, is meeting this week. For the first time, Kevin Warsh is leading the institution. Does this signal a change in direction?

The first thing I would say is that things could have been worse. Kevin Warsh has previously served on the Federal Reserve Board of Governors. He is not a complete newcomer.

That said, he strikes me primarily as a politician. He is a committed Republican and may well react differently depending on whether he is dealing with a Republican or Democratic administration. It is worth remembering that Kevin Warsh’s father-in-law is Ronald Lauder, heir to the Estée Lauder cosmetics empire and one of the largest donors to Donald Trump’s presidential campaign.

Clearly, Kevin Warsh was appointed to lead the Fed for a reason, most likely to lower rates rather than anything else. However, it is important to understand that the Federal Open Market Committee (FOMC), the Fed’s monetary policy decision-making body, consists of twelve members and operates on a majority-vote basis. Kevin Warsh has one vote, just like the other eleven members. He will therefore need to persuade them.

In particular, Jerome Powell, the former Fed Chair, who has decided to remain on the Board of Governors?

It is actually even more complicated than that. It is a genuine game of chess, and Jerome Powell has been a skilled strategist. I believe the main reason he chose to remain on the FOMC is precisely because decisions are taken by majority vote. Another member of the committee, Stephen Miran, had been appointed by Donald Trump.

Because Jerome Powell retained his seat as Governor, it was Stephen Miran – whose term was due to expire in January 2026 – who had to step aside to make room for Kevin Warsh. That means there is now only one Trump-appointed member on the Fed’s decision-making committee, rather than two. In my view, this strengthens the Federal Reserve’s credibility.

Kevin Warsh will therefore have his work cut out if he wishes to continue monetary easing. I believe he is more likely to adopt a neutral stance

In 2025, the Fed had begun cutting rates before the conflict in the Middle East brought that process to a halt. Now that the United States and Iran have reached an agreement, should we expect further rate cuts?

Before the conflict in the Middle East, we were indeed in a rate-cutting cycle. However, two things have changed. First, the energy shock pushed headline inflation in the United States above 4%. It is difficult to imagine the Fed cutting rates while inflation remains above that level. We will therefore need to wait for that inflationary pressure to ease.

Second, job creation in the United States was slowing at the start of the year. The Fed was lowering rates in order to support the labour market. Since then, hiring has accelerated again. Not to the extent that wage growth is accelerating, but enough to remove the urgent need for further rate cuts.

Kevin Warsh will therefore have his work cut out if he wishes to continue monetary easing. I believe he is more likely to adopt a neutral stance.

It is difficult to imagine the Fed cutting rates while inflation remains above 4%

Given the economic backdrop you have described, how should investors position themselves over the coming months?

There are two key conclusions. First, we remain in an economic expansion despite geopolitical tensions. Second, central banks are not going to hit the brakes as they did in 2022.

We remain fully invested, particularly in the United States and in the technology sector. We also favour Asia

Against that backdrop, we recommend remaining invested. We believe that, today, the greater risk is being out of the market rather than being invested. We therefore remain fully invested, particularly in the United States and in the technology sector. We also favour Asia – not only emerging Asia, but also Japan, South Korea, Taiwan, and Hong Kong.

The objective is to invest in the regions where the greatest efforts and investment are being made to build long-term economic resilience. We are not avoiding Europe altogether, but the aim is to remain well diversified across regions.