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Exit game: central bank’s transition from crisis policy is gaining momentum

The financial community is waiting for the Federal Reserve to start reversing its ultra-easy policy stance, but the recent measures taken by other central banks are also continuing with COVID-19. Nevertheless, it is hindering a smooth economic recovery around the world, showing that the days of adjustment in the pandemic era are already numbered.

South Korea’s central bank on Thursday raised benchmark interest rates by a quarter to slow the rise in financial stability risk from rising household indebtedness, the first in Asia since coronavirus expanded the global economy Became a major financial authority in the world. 18 months ago.

But even before interest rate hikes in South Korea, central banks in Latin America and Eastern and Central Europe are beating inflation that has arisen against the backdrop of currency fluctuations, global supply chain bottlenecks, and regional labor shortages. That is why we started raising interest rates this year. ..

And the central banks of larger economies fluctuate too. The Bank of Canada has already cut bond purchases and could push to raise borrowing costs in 2022, and the Reserve Bank of New Zealand (RBNZ) is set to raise interest rates by the end of this year, despite rebelling against earlier expectations. To be expected. Snap COVID-19 A week in light of the lockdown.

As part of that, the Fed is working to save $120 billion in monthly asset purchases, to be announced in late 2021, likely next month. However, the actual rise in US interest rates could take more than a year.

Federal Reserve Board chairman Jerome Powell will speak on the economic outlook later on Friday at the Central Bank’s annual Jackson Hall Summer Study Conference, which will take place virtually for the second consecutive year. His comments could contribute to expectations of the Fed’s margins as it moves, but are unlikely to provide any concrete signal.

1-year difference

Inflation rebounded as less than half of the 22 million US jobs lost to the coronavirus shutdown recovered in the spring of 2020 when Powell spoke at last year’s conference announcing a new policy framework that just started being tested. The target of 2% ran in half of the. The outlook outside the United States was less harsh and the blockade remained widespread.

The situation in the United States and other economies will be virtually unchanged in a year from now.

The US economy has fully recovered its lost production, about 9 million jobs have been restored and inflation is well above target. Elsewhere, the outbreak of COVID-19, caused by the highly contagious Delta subspecies, is creating a local blockade, which is often heterogeneous, but most of the global economy is booming. I’m back with you.

South Korea’s second-quarter economic growth was 5.9% year on year, the fastest pace in the past decade. At the Bank of Korea, young people are struggling with debt, and concerns about financial stability are mounting. Despite Delta variants putting pressure on the production of competing manufacturing industries such as China, Vietnam, and Malaysia, the export-dependent major manufacturing sectors in Asian countries expanded for the 10th consecutive month in July. ..

The recovery in Central Europe accelerated in the second quarter as the blockade in the region was eased. This improvement has prompted the Czech and Hungarian central banks to raise interest rates twice this summer as inflation rises. This is the first-rate hike in the entire European Union. Both are expected to tighten further, with Czech authorities arguing whether they should exceed the 1/4 percentage point increase in the norm.

Early moves were in emerging markets, where inflation was often exacerbated by volatile currency market movements, but the top economies are also beginning to tighten.

RBNZ has been sued over the complexity of the messaging that would result from such a move, along with a rushed blockade after the island nation reported its first local COVID-19 infection in six months last week. I chose not to increase it. However, central bank officials seem determined to raise interest rates before the end of the year.

Meanwhile, the Bank of Norway has indicated that it will not deviate from its original rate hike plan for next month, despite the recent rise in infectious diseases, and is the first in Group 10 (G10) developed countries to raise borrowing costs. It will be a thing. ..

“The Commission’s current assessment of the risk outlook and balance is likely to raise key rates in September,” Norges Bank Governor Øystein Olsen said in a statement last week.

The Federal Reserve Board and several other G10 banks appear to be heading for a reduction in pandemic measures this year, but the two main Federal Reserve Boards, the European Central Bank and the Bank of Japan. The tightening move of other companies in the same industry is a long way off.

However, this does not mean that the spread of delta variants does not mean that conditions have not improved.

Despite record highs for COVID-19 cases, Japan was one of the Asian economies to see growth in the manufacturing sector last month. And major ECB policymakers see limited headwinds for the eurozone recovery of this variant.

“I don’t think it’s far from what we expected in June for the whole year,” ECB chief economist Philip Lane told Reuters on Wednesday. “It’s a pretty balanced picture.”

(Reports by Balazs Korayi and Frank Siebelt in Frankfurt, Jason Hovet in Prague, Krisztina Than in Budapest, Leika Kihara in Tokyo, Praveen Menon in Wellington, Cynthia Kim and Joori Roh in Seoul, written by Dan Burns, edited by Paul Simao)

Exit game: central bank’s transition from crisis policy is gaining momentum

Brown  Exit game: Central bank transition from crisis policy is gaining momentum