Foreign Exchange Insights and Next Week
It Took Longer Than Generally Remembered for the Volcker and Greenspan Fed To Restore Price Stability
March 17, 2022
Several questions at Fed Chairman Powell’s press conference yesterday tried to elicit a response about whether it is possible to shrink U.S. inflation back to the target of 2.0% without nearly stalling economic growth or even putting the U.S. economy through a recession. Powell did not say definitively yes or no but gave reasons for […] More
Central Bank Watch
Bank of England Tightens as Expected, and More Moves Lie Ahead
March 17, 2022
The Bank of England as expected engineered a 25-basis point increase in its Bank Rate, but the 8-1 vote included a dissent in favor of a 50-basis point increase. The rate had previously been raised by 15 basis points in December and 25 bps in February, and at 0.75% is now back to its pre-pandemic […] More
Central Bank Watch
Central Bank of Ubekistan
March 17, 2022
The Central Bank of Ubekistan‘s policy interest rate was jacked up three percentage points to 17%, its highest level since the final 7 months of 2004 when such was at 18%. In between, the rate had been as low as 9% from the start of 2015 until mid-2017. During the first pandemic year, there had […] More
Central Bank Watch
Hong Kong and Taiwan Central Bank Rate Hikes
March 17, 2022
Officials at the Hong Kong Monetary Authority and Central Bank of the Republic of China (Taiwan) announced 25-basis point interest rate hikes in lockstep actions following the Federal Reserve’s similar move. After the first hike since December 2018, Hong Kong’s new base rate level will be 0.75%. Taiwan’s discount rate had been at 1.125% since […] More
Central Bank Watch
Central Bank of Brazil Tightens for a Ninth Time
March 17, 2022
A full percentage point increase in the Central Bank of Brazil‘s Selic rate to 11.75% matched what analysts were expected. The move was agreed unanimously, and a released statement foreshadows a similarly-sized rate hike at the next policy review: “For its next meeting, the Committee foresees another adjustment of the same magnitude. The Copom emphasizes […] More
New Overnight Developments Abroad - Daily Update
Inflation and Russian Invasion of Ukraine Casting Longer Shadows
March 17, 2022
Equities behaved in a widely diverse way overnight after the Fed enacted the first of many rate hikes. Share prices closed up by 7.0% in Hong Kong, 3.5% in Japan, 3.0% in Taiwan, 1.8% in India, 1.7% in China, and 1.1% in Australia. But stock markets so far are down this Thursday by 1.0% in […] More
Central Bank Watch
FOMC Rate Hike of 25 Basis Points Draws One Dissent Favoring 50 BPS
March 16, 2022
Fed officials believe the federal funds will need to climb around 225 basis points additionally before stabilizing in late 2023. There are lots of uncertainties creating cross-currents. It’s not hard to imagine even more aggressive restraint will become necessary before sustainable inflation within the targeted goal is at hand. Projected growth this year was shaved […] More
Central Bank Watch
FOMC Preview
March 16, 2022
Federal Reserve officials have repeatedly signaled that a cycle of many interest rates increases will begin after today’s FOMC meeting, and any initial incremental rise other than 25 basis points would be a huge surprise. Purchases of of Treasury and agency mortgaged-backed securities are already on schedule to end after this month. The previous cycle […] More
New Overnight Developments Abroad - Daily Update
An Historic FOMC Meeting on Tap Amid High Inflation and Some Cautious Optimism about the Pandemic and Diplomatic Efforts for a Russian Cease-Fire
March 16, 2022
The size of today’s initial federal funds rate hike is expected to be 25 basis points. I personally would prefer to see a bolder opening move of 50 basis points, as a symbolic gesture that Fed officials recognize that interest rate lift-off is starting late. But the credibility of forward guidance lies in not whip-sawing […] More
New Overnight Developments Abroad - Daily Update
Stagflation Breezes this Ides of March
March 15, 2022
Concerns that China will pay a price for supporting Russia’s invasion of Ukraine led to a huge rout in the Shanghai equity exchange, which tumbled 5.6% today, as in its vassal Hong Kong, the Hang Seng plunged by a similar 5.7%. Equities also closed down 2.0% in Taiwan, 1.3% in India and 0.7% in Australia. […] More
