2022: A hectic year for global monetary policymakers

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[...] ● Current forecasts show a fall in inflation below in the second half of 2022. ● It will take a few months perhaps until the fall - to completely stop net asset purchases. ● €1.85tn pandemic emergency purchase plan would stop net Market's Reaction ● Markets are pricing in 0.5 percentage point of rate increases by the end of 2022, compared with about 0.12 percentage points 2 weeks ago ● Eurozone government borrowing rates have soared ○ German 10-year government bond yields jumped 10 bps to 0.14%, the highest level since March 2019 ○ At 0.55%, its French equivalent is also at its highest level in almost three years ○ Spanish and Portuguese rates increased by 15 bps and Italy by 20 bps Adjustment in market expectations for the bank's monetary policy outlook The world paid $10trn in interest last year Towards a global increase in interest rates ● The stock of global debt has gone from $83trn in 2000 to around $295trn in 2021—a rate nearly double the pace of world GDP growth. [...]

[...] ECB has an informal constraint to maintain economic convergence between euro area member countries. ● The rise in energy prices is taking a toll on purchasing power and thus ultimately on household confidence and consumption. But inflation is still expected to slow down during the year. Eurostat annual inflation rates estimates There are 2 risks : ● The action of the ECB will take effect too late ● It will break the recovery ○ 2011 ● Targeted Longer-Term Refinancing Operations (TLTROs) ○ long-term preferential loans that it provides to banks to encourage them to finance the economy ○ TLTRO special interest rate will not be extended beyond June 2022 The debates between the doves and the hawks are likely to be passionate in the upcoming weeks. [...]

[...] ○ The world's wish to save is unlikely to weaken: the share of the world's inhabitants older than 50 is projected to rise from 25% to 40% by 2100. Consequences : How to tighten monetary policy without risking breaking the recovery? ● Tensions between the Northern countries and the Southern countries are likely to worsen in the coming months. ● ECB has to manage an impressive disparity of situations across the euro area : Inflation is rising everywhere, but not in the same way. [...]

[...] 2022: A hectic year for global monetary policymakers In the US ● Powell's term expired and he was named chair pro tempore while his renomination is considered. ● Sarah Bloom, Lisa Cook and Phillip Jefferson had their confirmation hearing. ● Bloom nominated to be at the top of the fed has been largely questioned by republicans for her stands about climate change. ● The Fed navigates by watching labor market, and inflation data. Washington left in the dark ● There's an Omicron fog - Diane Swonk ● Main obj: not to fall behind the inflation curve so that it becomes locked in expectations and a permanent feature of economic landscape. [...]

[...] Quantitative tightening ● BoE announced it had begun reducing its £895bn stock of assets it has bought to stimulate the economy since the financial crisis ● It will no longer reinvest the gov bonds it holds when they mature, which will reduce the total by almost in the next two years. UK in a nutshell : communication has been harsh, and the next year will be tough on businesses and households. Inflation in the eurozone set its latest record, climbing to 5.1% in January Coup de théâtre in Frankfurt “Inflation should remain high longer than expected ( . ) Compared to our December forecast, the risks to the inflation outlook are upwards, particularly in the short term.” Christine Lagarde Last December : Will the ECB raise rates this year? [...]