While the major central banks remained in an inflation dilemma; We continue to follow different opinions:
· Atlanta Fed President Raphael Bostic stated that he expects the Fed to increase interest rates by the end of 2022 as a result of the faster-than-expected recovery.
· Dallas Fed President Robert Kaplan emphasized that the Fed may reach the threshold of reducing asset purchases sooner than people think.
· Boston Fed President Eric Rosengren said that the Fed may consider raising interest rates towards the end of 2022 and that inflation is the central bank’s main target.
This opinion is also from the ECB;
· ECB’s Robert Holzmann said there is no room for raising interest rates due to weak inflation, adding that the PEPP will end when the coronavirus emergency ends, not anytime soon.
The facility schedule will be revised in September. ECB President Christine Lagarde could counter such arguments in a speech later in the day. Lagarde is a dove who favors printing more EUR to secure the recovery.
Tapering panic has been around for a while, now it’s been replaced by Delta variant panic. Central banks look at the following factors at the point of policy change: Mostly; There is huge inflationary pressure. Price pressures were fed to the upside, especially in the commodity group. The overall improved state of the economy and better employment conditions also added a demand component. Price pressures are currently occurring above projected and desirable levels. There is a possibility that the inflation effect created by the input costs will continue for a considerable time, so when inflation stabilizes in 2022, what we see may be a slight slowdown in the rate of price increase. Prices are still above pre-pandemic levels and the changes will not be as high as from last year, with the effect to carry over to next year. This will seem like a proportional improvement rather than a change in the inflationary structure and its control. That’s why details showing price changes within the overall dataset are still very important. The Fed will monitor the situation closely.
A new error term can be added to this model, the Delta variant. We see the UK reporting its highest increase in cases since January despite high vaccination. Some countries have even introduced travel restriction measures for British citizens. Whereas; The new Minister of Health announced that they did not postpone the 19 July Freedom Day, and that the opening would take place. Widespread opinion; if there is a new wave, it is more likely to be among the unvaccinated. Economic impact; It will appear if it causes restrictions in the economies of the main region for 3-4 months. It should be viewed as a downside risk.
Meanwhile, according to the Fed stress test, banks are better off in their capital buffers than in the pandemic conditions, and their ability to deal with a worst-case scenario is higher than before. Banks announce dividend and buyback program one after another.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
