The two most important central banks in the world, namely United States Federal Reserve (Fed) and the European Central Bank (ECB), He will announce new interest rate increases, following the current high global inflation numbers.
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The Federal Reserve’s Monetary Committee will assess between Tuesday, January 31, and Wednesday, February 1, the new interest rate hike, which The market expects its volume to be lower than previous markets Due to moderate inflation and weak real estate market.
Inflation reached a 40-year high in the United States in 2022. The Federal Reserve applies a policy of continuous increases in interest rates to increase the cost of credit and thus contain consumption and investment, which leads to higher prices.
Because of this systematic policy, the real estate market and retail sales showed signs of weakening, the increase in salaries began to moderate, and all the criteria taken into account by the Federal Reserve whose current development indicates a smaller rate increase than the one it adopted. Organism.
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“A slower rate of increases will give the committee time to assess the full economic effects of the monetary tightening so far.said Madhavi Pokil, senior vice president at Moody’s Investors Service.
Markets expect the Fed to adopt an increase of 25 basis points in their prices Which means a lower increase for the second time in a row. The Fed’s benchmark interest rate will be between 4.50% and 4.75%, a level last seen in 2007.
For its part, the European Central Bank points to new increases to deal with high inflation in the eurozone. After years of cheap money, the foundation is placing an order from mid-2022 High rates policy to cool down economic activity And stop the price escalation because of the war in Ukraine.
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Return to relative calm in the energy markets Inflation was allowed to decline in December for the second consecutive month to 9.2%, although it remained well above the 2% target.
This new hike will bring the interest rate that rewards undistributed bank liquidity in the form of credit to 2.5% and The rate of short-term refinancing operations to 3.0%, the highest since November 2008.
European Central Bank
American economist and Nobel Prize winner Paul Krugman He said the markets were confident that inflation was over and that financial conditions could reignite.
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“I am a bit concerned that the markets are getting ahead of themselves.Krugman said on Monday, January 30th.Markets estimate that inflation is over. It might be like denying yourselfHe confirmed.
There are growing signs of that The Federal Reserve succeeded in reining in the price increase Within a generation, with inflation falling across a number of indicators in December.
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