Simply Economics

Financial markets remain volatile and seemingly at the mercy of the latest inflation data. At the same time, diverging performances among the major economies continue to provide scope for a broader decoupling of central bank monetary policies.

In recent weeks, speculation about U.S. interest rate cuts this year has shifted from multiple reductions to higher-for-longer and, in some quarters, even to no any ease at all. So, what is the most likely scenario now?

It’s taken them 17 years to do it but the BoJ has finally raised key interest rates. Max Sarto, Econoday’s Japan expert, discusses what they did and what it means for the economy and financial markets.

Many central banks still seem to attach more risks to easing too early than too late. And while that will reflect the perceived economic fallout from either action, the prospective impact on policy credibility should not be ignored.

So far in 2024, the major central banks have resisted pressure in financial markets for early interest rate cuts. Pushback in some quarters has become more vocal so just how long will it be before key rates are lowered?

Much like 2022, there can’t be many forecasters unhappy to see the back of 2023. Nonetheless, with crystal ball in hand, here’s what the Econoday team think will be driving global financial markets in 2024.

This year has produced the usual string of surprises for global financial markets. The Econoday team reflect on which of these shocks had the most important impact on international investors.

Financial markets are increasingly anticipating interest rate cuts in 2024 despite many central banks sounding much more cautious. The Econoday team looks at what the economic data suggest will happen

In the face of extreme monetary tightening abroad, speculation was rife that the BoJ might finally be forced to follow suit yesterday. In practice, such talk proved overly aggressive. Max Sato and Jeremy Hawkins discuss what actually happened and what it means.

It took a while, but investors now seem to accept that many central banks will be keeping key interest rates at high levels for longer than originally expected. And with that, comes increased downside risk to financial markets and economic growth. The Econoday team discuss the potential fallout.

After the recent round of central bank announcements, hopes are building that many tightening cycles may finally be nearing an end. However, with prices up around 30 percent since last June, the oil market could yet mean some unwelcome upside surprises in future inflation reports

Yield curves are inverted across North America, much of Europe and parts of the Southern Hemisphere but investors are split over what happens next to the global economy. Is a downturn just around the corner or can we look forward to a soft landing?

Over the last couple of days, we’ve seen key interest rates hiked in the Eurozone, left on hold in the U.S. and cut in China. All of which means that the global economic outlook is as complicated as ever. The Econoday team pull it all together.

Taken together with the latest raft of central bank announcements, the recent deluge of real economy and inflation updates has given investors plenty to chew on. Here’s Econoday’s take on what it all means for the global economic outlook and financial markets

Recent interest rate hikes by several major central banks clearly underline the determination of the monetary authorities to get inflation back under control. However, for now, QT may have to run alongside central bank liquidity injections to reassure investors that another global financial crisis is not just around the corner.

Despite some generally hawkish central bank statements this week, financial markets apparently remain convinced that official interest rates will be falling before year-end. So, who’s right and does the disconnect matter? Terry Sheehan and Jeremy Hawkins discuss.

Market reaction to this month’s data underscores just how uncertain investors are about the global economic outlook. And this means that asset prices are likely to remain particularly sensitive to the higher frequency data, at least until the picture becomes clearer.

Friday’s U.S. employment report dominates this week’s economic data calendar but it’s been the disastrous U-turn in UK government fiscal policy and the subsequent enforced deferral of the BoE’s QT plans that’s left many investors really rattled. Terry Sheehan and Jeremy Hawkins discuss what’s going on.

Supported by aggressive rhetoric, this week’s raft of official interest rate hikes means that many central banks are still firmly in tightening mode. And that’s adding to recession risks and posing increasing problems for those monetary authorities reluctant or unable to follow suit.

The impact of surging energy prices on monetary policy has been apparent for some while now but as the cost-of-living crisis intensifies, the real economy fallout is increasingly forcing governments to intervene with fiscal help. The team discuss the global picture.

If there was one overriding message from last week’s Jackson Hole symposium it was that central banks have had enough of overshooting inflation. And from current elevated levels, that means further, almost certainly aggressive, monetary tightening that can only increase the likelihood of recession.

In recent weeks a number of central banks have modified, or even completely jettisoned, their forward guidance on interest rates. While sensibly allowing monetary policy to be more nimble, the changes also reflect increasing uncertainty about the economic outlook. The team analyse the latest developments.

Inflation is still far too high pretty well everywhere and, in some countries, still rising. However, as the real economy data disappoint, recession talk is getting notably louder. And if recession is just around the corner, it may be that the peak to inflation and interest rates is closer than many suppose.

To varying degrees, inflation, geopolitical tensions and inevitably Covid continue to dictate investor behaviour in general. However, policy responses around the world have to respect what’s going on locally and national economic conditions differ markedly. The team look at the dislocations in economic cycles and their implications for financial markets in this month’s global podcast.

Following a raft of central bank announcements on Wednesday and today, Terry Sheehan and Jeremy Hawkins discuss what the policymakers did and what it all means for financial markets in 2022.