Current politics. While the critical sessions at the Jackson Hole symposium and the Powell speech on Friday are awaited, markets expect a hawkish stance within the scope of Central bank policy. In addition, he thinks that if the effects of the global recession cannot be ruled out, a tightening that “works and puts the inflation down” does not occur, the rate hike will not be at its current rate in the coming period. In this sense, September FOMC may be the last meeting with a higher rate hike than traditional bands, and it should be kept in mind that the next steps will depend on economic activity, labor market and inflation developments.
Tighter monetary policy? While the recession pending at the door provides a basis for the thoughts of the camp, which thinks that there should be no further tightening in order not to announce it; Falconsists still think that the Fed should move forward in its current direction. One of them is Kashkari, who made a statement yesterday and said that the Fed's tightening should continue. Fed expectations still fluctuate from day to day, and each data released and its details send different signals. For example, while PMI data point to weakness in economic activity, the slowdown in housing data is critical as it is an interest-sensitive area. While the labor market continues to produce, the underlying causes of inflation indicate that, despite the decline in the headlines, there is still a long way to go in items directly affected by policy.
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Factors of global economic uncertainty… In this environment, there are many economic and external factors that will push the global economy into recession. If we order;
-Uncontrolled inflation pressure and income erosion in individuals
-Rate hikes by central banks
-Reflections of geopolitical problems, especially in Ukraine and Taiwan
All of these are on the verge, and the stagflation picture is more drawn, especially since the effects of disruption in global commodity supply will trigger inflation. The occurrence of such developments that will affect negative statistics in the economy will also increase the risks of a hard landing. While the potential of developed countries to be exposed to the crisis will differ among themselves, their potential to rely on aggressive tightening will also differ in this context. While the Fed may still rely on tightening and raise real interest rates due to a robust labor market, Europe does not seem to have the potential to create too many hawkish surprises.
Conclusion? Assuming that there will be no monetary policy tightening that will delay an expected recession, the period from the end of 2022 to the early stages of 2023 will be the scene to observe economic results. In this way, we will analyze in which phase of the next year the gradual slowdown in tightening will turn into rate cuts. In a sense, the ball will be on Fedspeak. Therefore, the steps after September, when interest rates will probably increase by either 50 or 75 bps, show that rate hikes will be in intervals closer to traditional bands and that the pace of tightening will decrease as the natural limits are approached. Powell's statements on the economic outlook at Jackson Hole on Friday will also show how the Fed will use this timing. The inflation issue still causes us to follow an open-ended direction.
Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı
