Do you think that the central banks of various countries will make interest rate hikes "king bombs"? In fact, they are planning to overturn the poker table...
The financial circle often says: "Never go against the central bank." But now, many market participants have found that even if they want to follow the central banks of various countries, they cannot guess what the central banks will do in this radical tightening cycle.
’s experience in the past day is undoubtedly the best example.
During the Asian session on Wednesday, the Bank of Korea announced a 50 basis point interest rate hike for the first time since it used interest rates as its main policy tool in 1999. The Federal Reserve Bank of New Zealand also announced a 50 basis point interest rate hike at its third consecutive interest rate meeting a few hours later. Although the rate hikes by the two major central banks were radical, they were still "predictable" and did not completely exceed market expectations. However, when the time entered last night, the rhythm suddenly changed completely...
The Bank of Canada took the lead in "not playing cards as expected" - the Bank of Canada, which had previously raised interest rates by 50 basis points twice, last night It "unexpectedly" raised interest rates by a full 100 basis points. Before this, few market participants expected the bank to be so aggressive. The last time the Bank of Canada launched an operation of the same scale was in 1998.
During today’s Asian session, market participants heard two more “unexpected” news:
In order to cool down inflation that is expected to exceed expectations, the Monetary Authority of Singapore issued its second unexpected move this year on Thursday, unexpectedly closing the Tightened monetary policy. The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, said in a statement that it will adjust the midpoint of the Singapore dollar nominal effective exchange rate policy range to the current exchange rate level so that the local currency can further appreciate against other currencies.
Shortly afterwards, the Philippine central bank also unexpectedly raised the benchmark interest rate by 75 basis points. The result was even more unexpected - Philippine central bank policymakers had publicly downplayed the need for significant interest rate hikes to quell the fastest inflation in nearly four years. According to historical statistics, today's 75 basis point interest rate hike is the largest rate hike by the central bank in the past 22 years.
It can be said that the unexpected "three consecutive strikes" of central bank tightening policies from overnight to this morning may have far-reaching impacts that are more shocking than the dazzling interest rate hike figures - because this may indicate that from now on, the interest rates of global central banks will change. Pricing has been completely messed up!
Interest rate hike expectations chaos
At present, there is a series of evidence that: the three central banks’ unexpected tightening actions so far last night will not be an exception globally...
In the United States, driven by another explosive inflation report, trading Last night, policymakers began to seriously consider the possibility of the Federal Reserve raising interest rates by 100 basis points in July.
The pricing of the short-term interest rate STIR market shows that the market currently predicts that the possibility of the Federal Reserve raising interest rates by 100 basis points in July has exceeded 66%, and the expectation of a further 75 basis points interest rate hike in September has almost been locked in.
and If the expectation of a 100 basis point interest rate hike this month comes true, then this will mean: the Fed’s four meetings since March will have experienced 25 basis points, 50 basis points, 75 basis points, and 100 basis points. Four different rate hikes. The "child's play" of switching interest rate hikes is almost unprecedented...
Without the "God's perspective", who could have predicted the above scene at the beginning of this year. And if even the Federal Reserve may change from the most predictable central bank in the world to one of the least predictable, how can other central banks be exceptions?
At present, after Australia's stronger-than-expected employment report was released during the day, expectations that the Reserve Bank of Australia will raise interest rates at a very large rate have also surged.
In the UK, given the surprisingly strong economic performance in May, investors have also begun to expect that the Bank of England may raise interest rates by 50 basis points at its next meeting, double the previous hike.
Who is lagging behind and who is unlucky?
Of course, the fundamental reason why central banks around the world began to play cards "unexpectedly" is mainly because of the sluggish price levels in the past 20 years, which made central bank officials relax their vigilance. They thought that the inflationary pressure that would appear in 2021 would soon will disappear. But the chaos in the supply chain is actually more lasting. Coupled with the Russia-Ukraine conflict and the soaring prices of commodities , it has decisively eliminated any possibility of adopting incrementalism in the fight against inflation.
In a world where many central banks are stepping up their game, it is becoming increasingly clear that central banks that lag behind will be punished: A weaker currency will raise import prices, leading to worsening inflation.
Europe is a representative example right now. The euro against the U.S. dollar once fell below the 1:1 parity mark this week, and the depreciation of the exchange rate is further amplifying the energy crisis Europe is currently facing. A spokesman for the European Central Bank said this week that the European Central Bank is paying attention to the impact of exchange rates on inflation - echoing the competitive pressures of a reverse currency war that many in the industry have mentioned recently.
industry columnist James Mackintosh wrote last weekend that just as the United States "won" the battle to devalue the dollar after the 2008 financial crisis, it is now relatively "winning" the battle to appreciate the dollar. Whether it was the depreciation of the U.S. dollar at that time or its current appreciation, the Fed proved to be the most influential player on the market among the major central banks, and in both experiences, it was happy to see exchange rate fluctuations.
In any case, when an interest rate hike of 100 basis points is gradually put on the table of the central banks of the world's developed economies, it is difficult not to make people begin to suspect that a financial tsunami raging around the world may be coming. "The Bear Traps Report" editor Larry McDonald said this week that the current aggressive interest rate hikes go hand in hand with a strong dollar - which is likely to be 100 times more destructive than the Carter-Reagan era. .
Rabobank rates strategists Richard McGuire and Lyn Graham-Taylor wrote in a note on Wednesday that "central banks will carefully watch for evidence of slowing economic growth until they believe the inflation genie will be forced back into the bottle, but we Still believe that if the demand curve needs to be changed to achieve this goal, then policymakers will be willing to agree to trigger an economic recession. "
Original title: More terrifying than raising interest rates: In the past 24 hours, global central banks have begun to "not play cards as expected. "It's...
Source: Financial Associated Press
