Key Points
- It is a precarious situation worldwide as most economies face tough times necessitating action from Central Banks.
- Globally, different stances have been taken by respective Central Banks in June to cope with the rising inflation and recession fears.
Central Banks worldwide have showcased commitment to dealing with wild inflation and evading possible reversed GDP growth. These efforts are necessary as costs of living are increasing in the short term, and if no action gets taken, they could go wild in the future, crippling the basic functioning of the economies in question.
Central Banks keeping the fight against inflation alive
On Thursday last week, the European Central Bank increased interest rates while the U.S. Federal Reserve opted to pause it. These decisions came just days after China’s Central Bank lowered its key medium-term lending rates while Japan’s Central Bank left its ultra-loose policy unchanged.
From hawkish pauses to rate hikes and dovish tones, the world’s biggest Central Banks are taking different strides to deal with the almost ‘common’ economic threats. However, it doesn’t come without surprises or criticism as markets digest the new policies.
The hikes rates by the European Central Bank on June 14, 2023, surprised the markets with a worsening inflation outlook which led investors to consider even more rate hikes for the Eurozone.
This decision followed the federal reserve’s rates hike pause. It didn’t go without surprises and reactions from the market. Ruslan Lienkha, Chief of Markets at YouHodler, talked with Fintech Express and told us that Powell still has a long way to tame inflation rates and maintain market balance.
He added that while rates hike at later dates are not ruled out, the markets won’t be very happy with the tough decisions that must be made. In his words, he said:
“It is too early to say that Powell is winning the fight against inflation. I don’t think bringing inflation to 2% will be so smooth. The main concern is about the too-hot labor market at the moment. Therefore, the Fed can later decide to continue the rate increase or keep high rates for a significantly long time – such scenarios are quite possible and might disappoint financial markets in one or a few months.
As for crypto, the major cryptocurrencies will follow traditional markets. The only question is the degree of this correlation, which we still need time to figure out.”
In the Eurozone, inflation rates have plummeted, but it still is necessary to keep pushing as it’s far away from ECB’s target levels. This is also the same case in the U.K. BoE is expected to raise rates this Thursday as the country still has very strong labor data.
The markets are, however, different in Asia. China’s economy has lost the momentum hoped to be there for post-COVID-19 recovery. As such, it has stalled with falls n both external and domestic demand forcing policymakers to step up support measures to revive the growth momentum. These developments across the world show that there is still a lot to be done if Central Banks hope to regain control of economies and ease the costs of living.
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