Simply Economics

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.

It's a big week for investors with the Fed expected to step up the pace of QE tapering on Wednesday ahead of what should be very different policy announcements from the SNB, BoE, ECB and BoJ (EST) all on 'Super Thursday'. Terry Sheehan and Jeremy Hawkins discuss the key issues facing the decision-makers.

Just when it seemed that the outlook for central bank policy was getting a little clearer, the arrival of the Omicron variant has cast a fresh cloud over the speed and extent to which QE and/or interest rates might be adjusted. Mark Pender and Jeremy Hawkins discuss the latest developments.

The dollar’s recent gains in part reflect euro weakness with the Eurozone unit now at multi-month lows against a range of currencies. Moreover, in the absence of a change in tone from the ECB, upcoming economic data and events could well reinforce the currency’s slide. Terry Sheehan and Jeremy Hawkins discuss the medium-term outlook.

U.S. inflation continues to climb and with it, so does speculation about early Fed tightening. With yield spreads likely to widen in the currency’s favour, October’s shock CPI report could open the door to a significantly stronger dollar that, in turn, would provide an additional unwelcome lift to prices overseas. Mark Pender and Jeremy Hawkins discuss the latest developments.

Financial markets have become used to being forewarned by central banks about prospective changes to monetary policy. However, when such decisions are split, clear communication becomes much harder. Terry Sheehan and Jeremy Hawkins discuss last week’s announcements and how the Fed got it right and the BoE got it wrong.