More Risk Aversion and a Trio of Central Bank Interest Rate Decisions
October 22, 2026
It’s been another day of scary news from West Asia. After U.S. negotiator Witkoff sucked up to Russian President Putin and elicited an agreement to restart three-way peace talks among Ukraine, the U.S. and Russia, the latter struck its southern neighbor very hard militarily overnight. Even more worrisome, Washington has requested its diplomats to leave Saudi Arabia in a sign that may portend a fresh U.S./Israeli assault on Iran.
This backdrop made for a difficult day in stock markets around the world, with losses of 2.7-3.5% in Japan, Hong Kong and South Korea and of 1.5-1.8% in Shanghai and Taiwan. The Italian MIB, Spanish IBEX and Paris CAC are down 1.7%, 1.6% and 1.1%, while Nasdaq, SPX, DOW, and Russell 2000 futures less than a half hour prior to the opening bell showed declines of 1.7%, 1.0%, 0.6% and 0.6%.
The rush into safer investments has depressed 10-year sovereign debt yields by nine basis points in the United States, 6 bps in Germany, five bps in Canada, 4 bps in Switzerland, 2 bps in Spain and a basis point in Great Britain. With street demonstrations continuing over France, the 10-year yield there climbed another three basis points.
The dollar shows a 0.6% loss against the yen, which benefited from remarks made by central bank officials there. Dips of 0.2% relative to the won and Swiss franc have been counterbalanced by an equal-sized dollar firming against the euro.
Brent and West Intermediate prices for crude oil have jumped 2.9% and 2.4% above Wednesday closing levels to $112.03 and $99.48 per barrel. It’s not been a good session so far for Bitcoin, down 2.7%, nor for precious metals such as gold (down 1.5%) and silver dropping 3.0%.
As was anticipated, officials at the Central Bank of Turkey lowered their one-week repo rate by a full percentage point to 36.0%. That was the rates first change since a similarly-sized cut last January, which in turn came after cuts totaling 900 basis points during the second half of 2025. The resumed rate-cutting cycle was enabled by a drop in Turkish CPI inflation to a 118-month low of 29.73% last month. However, a released statement cautions that “elevated energy prices due to ongoing geopolitical tensions continue to pose an upside risk to the inflation outlook” and warns that “in case of a significant and persistent deterioration in the inflation outlook, monetary policy stance will be tightened.”
In contrast to Turkey, monetary authorities at the Central Bank of the Philippines raised their policy interest rate today by a greater-than-anticipated 50 basis points to 5.50%, bringing its cumulative increase over its last four reviews dating back to April to 125 basis points. Filipino consumer price inflation of 7.2% in September was over a percentage point above August’s reading and matched the highest level in 42 months. Warning that inflation now seems unlikely to return to their 3% medium term target, a released statement today identified “a need for a strong monetary policy response to broadening price pressures and further upside risks to inflation. Such a decisive response will make monetary policy appropriately restrictive. This will contain second-round effects and firmly anchor inflation expectations.”
In South Korea, monetary officials took yet a third approach, the temporary pause at 3.0%, which was endorsed by all seven board members at the Bank of Korea. At consecutive policy reviews, the Base Rate was raised by 25 basis points to its current level. Officials observe, “the domestic economy is expected to maintain its high growth rate, supported by continued strong exports and investment, and by a strengthening recovery in consumption, while inflation is projected to remain above the target level [of 2%] for a considerable time, driven by the pass-through of accumulated cost pressures and by increasing demand-side pressures. The Board will decide the timing and pace of further increases in the Base Rate while assessing trends in inflation and the domestic economy, as well as financial stability.” The next review is set for late November.
New U.S. jobless insurance claims last week fell 6K to 194K and were below the 200K bar for the fifth time in six weeks. A very slow rate of job layoffs is keeping unemployment historically low in spite of sluggish employment expansion.
Consumer confidence in October weakened 7.1 index points to an 8-month low of 84.8 in Turkey and significantly under the 100 line that separates pessimism from optimism. Dutch consumer sentiment dipped a point to a 2-month low of -34 this month, and Slovenia’s consumer confidence measure of -27 was at its lowest level in a half year. Danish consumer confidence also became more negative, sliding to a 5-month low.
French business confidence improved slightly but at 97.5 remained below the long-term average of 100 for a 30th straight month in October. Manufacturing improved strongly to a 51-month high, but retail, trade, construction and the labor market posted lower readings.
Consumer price inflation in New Zealand slowed more than forecast during the third quarter to 3.7% after reaching an 11-quarter high in the second quarter of 4.1%. Core inflation printed at 3.2% fourth straight quarter.
The orders component of the monthly industrial trends survey compiled by the Confederation of British Industry had rallied in September by 23 index points to a 3-month high of -9 but sank even more sharply this month to reading of -32.
Foreign direct investment in China continues to record negative year-on-year changes but is doing so at a diminishing pace. The nine-month change reported today of -4.3% was smaller than the 5.0% on-year decline in the first half of 2026, the 8.5% slide in full 2025 or the 2025 plunge of 27.7%.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Korea, Central Bank of The Philippines, Central Bank of Turkey, French business climate index, New Zealand CPI
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