WHILE interest-rate hawks have owned the first half of 2022, the future will be more contested.

       Two of the earliest rate hikers are already preparing for slower growth and, in one instance, acknowledging the prospect of eventual cuts in borrowing costs.

       The tussle against inflation, though painful, could be shorter than expected.

       That’s one takeaway from the Reserve Bank of New Zealand (RBNZ) and Bank of Korea (BoK)this week, even as both pressed ahead with rate increases and all but promised more to come.

       These aren’t merely two peripheral institutions: Their challenges are microcosms of those the Federal Reserve (Fed) will face as it seeks to push inflation back to comfortable levels while global growth loses altitude.

       Keen watchers of the Fed, Bank of England (BoE) and European Central Bank would do well to pay attention.

       The latest minutes of the Federal Open Market Committee quieted fears of a 75 basis-point hike in the near to medium term.

       They could even be interpreted as opening the door for a pause, or for scaling back the magnitude of tightening.

       “Many participants judged that expediting the removal of policy accommodation would leave the committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.”

       In other words, hurry up and hike, so we can slow down.

       The message from the RBNZ’s meeting Wednesday is similar.

       Officials ratcheted up their benchmark rate by a half point, as widely anticipated, and signalled further steps in that direction.

       Look farther ahead, however, and the RBNZ is projecting reductions in 2024.

       By the second half of next year, inflation will have receded to the upper end of the 1% to 3% target, from 6.9% now.

       Growth will slow to a bit more than 1% in the year beginning next March.

       The bank isn’t ruling out a recession, but says that isn’t its assumption.

       The BoK’s new governor Rhee Chang-yong also talked tough about inflation. More hikes are sure to follow Thursday’s quarter-point climb to 1.75%.

       The bank shaved its growth forecast for this year.

       By all means, clamp down on inflation, especially when you are fresh to the job and have credentials to prove. But at what cost and with what qualifiers?

       “While the bank should remain hawkish in the near term, it is likely to turn decidedly less so further ahead as the economy slows,” Alex Holmes, an economist at Capital Economics, wrote in a note.

       “We think the tightening will draw to a close this year.”

       Though not exactly economic behemoths, South Korea and New Zealand are worth heeding, and not just because they began withdrawing accommodation sooner than the Fed, BoE or Bank of Canada. The country is at the centre of many trends in the global economy: Exports account for about 40% of gross domestic product; it’s a vital part of the technology supply chain; and officials are fretting about sky-high housing costs.

       New Zealand, for its part, pioneered formal inflation targeting three decades ago.

       The country also has an unfortunate history of moving early and aggressively to raise rates, then reversing course almost as fast. Both nations are closely linked to China’s economy, which may shrink this quarter and is heading for very poor growth this year.

       If nothing else, commentary from monetary chiefs this week give us an opportunity to scrutinise the dominant hawkish narrative.

       The global economy is decelerating, with the International Monetary Fund last month making steep cuts to its forecasts.

       The fight against inflation isn’t something that has to be waged intensively without heed to the costs.

       After the pandemic, the political appetite and “the public tolerance for having a central bank that says inflation is bad and that we have to have a recession is very, very low,” Harvard University economist Kenneth Rogoff said at a Bank of Japan web event this week.

       Economists are sceptical that New Zealand’s main rate will peak at 4%, as projected by the central bank. The highest it’s likely to get is 3.5%, many say.

       The housing market is sliding and there’s doubt the bank will be as tough as it proclaims.

       The risk of a downturn needs to be weighed against the danger that “inflation expectations become unanchored and more persistent, and that means there’s even more work for us to do in the future,” governor Adrian Orr said in an interview with Bloomberg Television on Thursday.

       “We need to balance those two stories.”

       Whatever Orr does, the alternate narrative he offers is much needed.

       There’s been too little questioning of hawks this year. Doves may yet fight back before the end of 2022. — Bloomberg

       Daniel Moss writes for Bloomberg. The views expressed here are the writer’s own.