For central banks in the United States, the eurozone, Japan, Britain, Mexico and Russia, a turbulent week begins. Reuters is analyzing what we can expect, BTA reported.
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1. A more restrained Christmas in the United States
To what extent are markets willing to tolerate a tighter approach by the US Federal Reserve Authority? The answer may come as early as Wednesday, December 15, when the US Federal Reserve will close its last meeting for 2021. Her generosity has helped the Standard & Poor’s 500 double its value from its March 2020 lows, but shares have been fluctuating amid fears about Omicron and expectations of shrinking stimulus after UFR chairman Jerome Powell signaled that management will discuss a faster pace to reduce bond purchases. Some analysts have suggested that a somewhat tougher PFM policy may have already affected stocks, which have risen in price in recent days. Signals that the US Federal Reserve has growing concerns about inflation – even after hinting that it is time to remove the word “temporary” from the description it gives of the jump in prices – could stir markets. Assumptions about a more aggressive way to increase interest rates in the so-called “point chart” of interest rate expectations may also lead to this.
2. Are you ready for more?
Across the ocean, the Bank of England and the European Central Bank (ECB) will present their monetary policy decisions within 45 minutes on Thursday (December 16th). Both institutions have the potential to move markets.
Uncertainty fueled by the new version of KOVID-19 Omicron has frozen expectations of a recent increase in interest rates from the British central bank, but markets do not rule out a 15-point increase.
The ECB should confirm that its € 1.85 trillion Pandemic Extraordinary Bond Purchase Program (PEPP) will end at the end of March. However, there is now a battle going on between supporters of tougher and softer policies over how much of this support will remain in place after the end of the scheme. Omicron and continuing inflation complicate the debate.
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Meanwhile, the Bank of Japan closed its two-day meeting on Friday, December 17, and a decision may be made to end some pandemic stimulus programs when they expire in March. But here, too, there is a possibility that they may be extended because of Omicron.
3. “E” as default
It seems that the troubled Chinese real estate company Evergrande has reached a point of no return.
The $ 82.5 million missed payment could play the role of a domino tile, provoking a cross-default process worth about $ 19 billion of the company’s international debt. Even more worrying is the risk of total liabilities of $ 300 billion “infecting” the wider Chinese economy and markets.
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The rating agency Fitch lowered its rating for Evergrande to a “limited default” and this affected commodity prices, including crude oil, and renewed concerns about the Chinese economy. Authorities have said the negative effect is manageable, but they have many other tasks right now.
The central bank cut the share of required bank reserves to stimulate growth, and then raised the requirements for foreign exchange reserves to stop the appreciation of the yuan. The government is also facing an ever-widening diplomatic boycott of the Beijing Winter Olympics, which could mark the front lines with the West.
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4. Will the Turkish Central Bank lower interest rates again?
On Thursday (December 16th), Turkey’s central bank will have to decide whether to follow President Recep Tayyip Erdogan’s call and cut interest rates again amid inflation of more than 21 per cent and the weak Turkish lira, which fell 36 per cent this quarter.
This week, Turkey will also establish itself as an exception among the aggressive central banks in emerging markets, struggling with rising inflation and the consequences of possible UFR moves. Hungary is expected to raise interest rates by 30 basis points today, and Russia could follow suit on Friday by 50 basis points.
In Latin America, a region that has seen a significant rise in interest rates in the past year, there are high expectations that Chile today, Mexico on Thursday and Colombia on Friday will again resort to rising rates, notes Reuters.
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