In July, the ECB will take the baton, which also stopped the bond repurchase program.
By Chrysostomos Tsoufis
The markets are there under the influence of the “epidemic” of inflation and everyone is waiting for what they will … prescribe central banks. First one the Fed decides in a few hours. Until Friday, all indications were that interest rates would rise by 50 basis points. But Friday’s data showed the highest inflation in the US in 40 years and put it the country’s central banker Jerome Powell on burning coals. Now an increase of 75 points – which would be the largest since 1994 – is not unrealistic if not in today’s meeting, in one of the next 2 in July and September.
Faced with the highest inflation for 40 years is the Bank of England which decides tomorrow Thursday. And while everything showed an increase of 25 basis points, and here it is not excluded that the 50 units will be put on the table.
The ECB will take over in July which also halted the bond repurchase program, removing liquidity from the market and causing delirium in bond markets with interest rates soaring, making lending prohibitive.
If the Hellas was entering the markets today with a 10-year bond, the interest rate would reach 4.7%, ie in the amount before the memorandum period. Record of 9 and 10 years and for the bonds of the other countries of the region Spain and Italy. Even the Germany which a few months ago enjoyed negative interest rates saw its 10-year bond soar above 1.75%.
The big fear of the markets is that the central banks – pressured by the dizzying heights of inflation and the criticism that they were slow to react – will show “excessive” zeal raising interest rates quickly and sharply, “shooting” the already weak growth.
All the international organizations, one after the other, revise their estimates on hand for the development. Some countries, such as Great Britain, whose GDP is shrinking for 2 consecutive months, are already heading for recession. Others like France flirt with her.
The anxiety is evident as we enter a period where any prediction is uncertain. It is indicative that the VIX fear index that shows the volatility of the stock markets has reached these days its highest point since March 2020 when the pandemic broke out.
