Global central banks are keeping an eye on inflation and believe that growth will continue despite the conflict.
Reuters (Reuters) – The Russian invasion of Ukraine may impede the global economy and create new economic threats, but the world’s leading central banks are keeping their attention focused on an inflation battle that is expected to deepen as prices rise across the board, from gasoline to food.
In a statement on Thursday, the European Central Bank (ECB) said that the area could not ignore rising inflation in the eurozone, even though Europe is the most at risk of a bigger economic shock from the war.
The European Central Bank (ECB) agreed to stop pumping money into the markets this summer, paving the way for possible interest rate increases later this year, which would be the first in more than a decade. The war, the ECB said, was a “watershed moment” that could slow growth while increasing inflation.
Inflation can be sliced and diced however you want, and any fundamental metric will show that it is above target and growing. We have a 2 percent mission, and we’re succeeding in it “One policymaker at the European Central Bank, who preferred not to be identified, said:
A similar story was taking shape in other Western countries, including the United States, as policymakers weighed the possible damage to their economies that could come from the fight against high inflation.
Growth in big countries is likely to be above trend, which will allow them to focus on inflation, which is running much higher than their goal of 2%.
Earlier this month, the Bank of Canada increased interest rates by a quarter percentage point.
Next week, the Bank of England and the Federal Reserve are likely to make similar moves. Every one of them is projected to hike their prices in the coming months.
Even fiscal policy experts, who are more aware of the politics of the economy and are often in favor of looser central bank policies, are aware of the corrosive effects of price rises that they can’t control.
On Thursday, Treasury Secretary Janet Yellen expressed “extreme worry” about the state of the economy. “It has a significant impact on Americans. It causes people to be concerned about the most fundamental of financial concerns. “
Investors now think the Federal Reserve will raise the target federal funds rate to a level between 1.75 percent and 2 percent by the end of the year, which is a quarter-point more than they thought just a week ago.
The European Central Bank (ECB) was a latecomer to the tightening process and will have to pay a price as a result. The euro has suffered a steep decline in recent weeks on forecasts that the European Central Bank would take its time in reducing stimulus, which would result in greater inflation as a result of higher import costs.
This year, inflation is expected to exceed 5 percent across the euro area, more than double the ECB’s objective of 2 percent. It will take until 2024 for inflation to return to that level.
He predicted that the Federal Reserve would tighten more quickly and that the foreign exchange market would reflect this. Even when the Federal Reserve meets next week, I wouldn’t be shocked if the euro continues to lose ground. Our central bank has lagged behind the times when compared to other central banks. “
Economists tried to get the European Central Bank (ECB) to listen to them on Friday, saying that rising commodity prices could cause the eurozone to go into recession. Officials didn’t listen to them.
“Growth continues to be robust, and there is no recession,” said Francois Villeroy de Galhau, the head of the French central bank.
Murkier’s outlook on Asia
The Bank of Japan is the only major central bank that is expected to keep its monetary policy ultra-loose even as energy prices rise and inflation nears its goal of 2%.
In a statement released on Tuesday, Bank of Japan Governor Haruhiko Kuroda stated that “if crude oil and commodity prices drive up inflation while wage growth remains slow, this will hurt households’ real income and corporate profits, and ultimately hurt the economy.”
In Asia, where many economies have lagged behind their Western counterparts in lifting harsh pandemic restrictions, the path of monetary policy is less clear.
Some central banks in the area, such as those in New Zealand, South Korea, and Singapore, have already tightened monetary policy as a result of significant concerns about rising prices and imported inflation.
Australia’s top central banker warned borrowers on Friday that it would be good to plan for a rate hike this year, given the country’s projected rise in consumer prices.
The necessity to maintain a shaky recovery in the majority of other countries in the area is likely to complicate talks.
Thailand’s central bank is unlikely to hike interest rates shortly, despite inflation reaching a 13-year high as a result of the war’s impact on tourism and commerce.
