The main central banks of the world, who all came together this week with an unusual connection, they found themselves at change quickly and furiously their addresses and to agree in thebe ready to face any upsurge of inflation with more restrictive policies: I'escalation of the war with Iran has in fact put at risk the vital energy infrastructure of the Middle East and has pushed the I'm raising fuel prices. However, we find ourselves in a context in which the world economic growth, because of the tariff bombs dropped by Trump, it is still uncertain and therefore central banks will have to carefully maneuver their policies to avoid a much greater risk of stagflation: high inflation and modest growth.
Starting from Wednesday the Iranian attacks caused extensive damage to the world's largest gas plant in Qatar and hit others Gulf infrastructure, following Israeli attacks on its gas facilities. These attacks make it more likely that the global economy will face long-term damage to energy suppliesOil returned to nearly $120 a barrel yesterday, although it is settling below $110 today.
But the feeling is that now the oxen have bolted leaving a deep mark, even if the war were to unexpectedly end today: the conflict has supply chain disrupted energetic and thelong shadow of the energy crisis is far from having dissolved.
With the rapid reversal of course by central banks this week, from the prospect of rate cuts to that of a tightening, all markets are reacting, but in particular the pressure is on bond markets and on . The dollar instead, which should rise in the event of rate hikes, is instead falling because the The Fed has proven to be the least “hawkish” of all his counterparts this week.
Central banks agree: the imminent rise in inflation will have to be controlled with interest rates
This week, the agendas of the central banks of the United States, Japan, Great Britain, Canada and the eurozone – effectively the Group of Seven, as well as several other banks from smaller economies – intersected.
The burn of the pandemic period still burns and after the criticisms received Having acted too late to contain the post-Covid price surge, which was then magnified by Russia's invasion of Ukraine in 2022, monetary policy officials this time appeared determined to keep inflation at bay. With an eye for the economic growth, still discontinuous, trying to avoid a “stagflation“, or a combination of recession and price spikes.
La Federal Reserve Use and the Bank of Canada Wednesday they both have opted to maintain rates of interest unchanged, followed by yesterday Bank of Japan, Bank of England, European Central Bank and the central banks of Switzerland and Sweden with the same tone. However, they made it clear that they are on alert, worried that therising energy prices could trigger a wave of inflation across the economy if, for example, it began to push households to ask for higher wages, fearing loss of purchasing power.
ECB: Upside risks for inflation and downside risks for growth
“The war in the Middle East has made the outlook significantly more uncertain, creating upside risks to inflation and downside risks to economic growth"said yesterday ECBIn the press conference following the decision, the president of the ECB Christine Lagarde He also said that the eurozone is resilient and that the low inflation The current situation puts it “well placed” to deal with what it called “a major ongoing shock.” The central bank revised upwards its inflation forecast for this year to 2,6%, above its 2% target, and published scenarios based on Inflation could decline again if the shock proves temporary, but could rise to 4,8% next year if difficulties persist. In the absence of a rapid resolution to the conflict, ECB policymakers are likely to initiate discussions in April and possibly tighten policies at their next meeting in June, ECB officials reported yesterday. Reuters from some sources.
Bank of England: The right position is to keep rates unchanged
Commenting on the unanimous decision of the Monetary Policy Committee of the Bank of England to keep interest rates unchanged, the BoE governor, Andrew Bailey, said the bank would have to react to the persistent impact on inflation in the UK. However, he resized le expectations of the markets regarding a sharp tightening monetary policy, as market participants had already priced in two 25-basis-point interest rate hikes by the end of the year, compared to just one expected before the meeting. "I would caution against jumping to conclusions about whether we will raise interest rates," Bailey said in an interview with British broadcasters. "We sent a very clear message today: the right position is to keep rates unchanged."
In Tokyo, the governor of the Bank of JapanKazuo Ueda said the BOJ would not rule out raising short-term rates if the negative impact on growth from soaring oil prices proves temporary and does not jeopardize the bank's long-term achievement of its price target. "We must keep in mind that recent developments are occurring at a time when companies are already actively raising prices and wages, which suggests they may be passing on costs more aggressively than they did after the war in Ukraine," Ueda said at a press conference.
Even the governor of the Bank of CanadaTiff Macklem expressed a similar view: “If energy prices remain high, we will not allow their effects to spread and turn into persistent inflation,” he said.
The only one to have already raised rates this week, but it was expected, is the Reserve Bank of Australia which brought it to the highest level in the last 10 months and warned of a “substantial” risk to inflation. Instead, the Brazilian central bank, with one of the highest rates among major economies, opted for a prudent 25 basis point cut, bringing the benchmark rate to 14,75%, a bottom cut as initially expected.
The Fed: From the prospect of two cuts in 2026 to stand by
The U.S. Federal Reserve ultimately emerged as the only major central bank not expected to raise rates this year. Before the start of the war between the United States and Israel against Iran in late February, investors had expected two rate cuts by the Fed this year. They now consider one of these to be a distant prospect, and forecasts for other major central banks have become even more restrictive.
Government bond yields rise everywhere
La restrictive rate review triggered a collapse in global bond markets and a consequent rising yields, especially on short-term maturities, the most sensitive to the rise in official rates. British government bonds In the short term, yesterday recorded one of their worst days since records began, while the performance of US Treasury securities At one point, the two-year yield jumped by more than 20 basis points. This morning, government bond yields Australians benchmarks have reached their highest level in nearly 15 years, while yields on two-year bonds New Zealanders They reached their highest point in about a year.
In Europe the performance of the Btp to 2 years saw an increase of more than 2% this morning to 2,89%, the similar maturity of the german bund has a yield up 2,4% to 2,43% and that of the French Oat at 2,78%, also up 2,4%.
Yields at the long end of the curve also rose. Yields on 10-year UK Gilts rose to 4,848%, up more than 10 basis points from the previous day's close (+2,17%), after peaking at 4,909%, a new 52-week high. Ten-year US Treasuries saw their yields rise to 4,279%, their highest in two months, and the 10-year German Bund remained close to its two-year high at 2,944%.
Gold is headed for its third consecutive weekly decline. Silver is also down.
With the prospect of an interest rate cut in the near term diminishing, the is starting to record the biggest weekly loss in six yearsThe precious metal has lost value every week since the United States and Israel attacked Iran on February 28, accumulating a -10%. Although gold is often considered a safe haven against inflation, rising interest rates tend to reduce its attractiveness, since the metal does not offer any return.
Gold prices rose slightly this morning thanks to technical buying, but are heading towards third consecutive weekly declineSpot gold rose 0,6% to $4.675,23 an ounce this morning, but with a weekly correction of 7%, compared to the over 5.000 dollars touched in recent days. Same movement for silver which even lost more than 10% in a week, settling around 73 dollars.
The dollar is falling, however. Why?
A separate discussion deserves the dollar which, after having risen to multi-month highs this week, dusting off its role as a safe haven asset and all in all in a manner consistent with the air of monetary restrictions, today instead loses ground precisely because the Fed it turned out in the end the least “hawkish” of all the others in perspective. Thus, the euro, the yen, the pound, and the Swiss franc are set to close the week higher against the dollar. The euro, although slightly weakened today at $1,1572, is up 1,3% since the beginning of the week. yen, trading at 158,47 per dollar, gained 0,8% and the GBP, which is hovering around $1,3420, is up 1,5%.
The index of dollar The dollar gained less than 0,1% today, settling at 99,35, and is on track to close the week with a 1,1% decline, its largest decline since late January. Nonetheless, many analysts believe a prolonged decline is unlikely. "The longer the war drags on, the more the US dollar will appreciate, as it will benefit from demand for safe-haven assets stemming from increased uncertainty and also from the fact that the United States is an energy exporter," he said. Reuters Carol Kong, currency strategist at the Commonwealth Bank of Australia.
