Central banks around the world are risking recession and raising interest rates. They're following the lead of the U.S. Federal Reserve, which approved its third consecutive 75 basis-point hike Wednesday in the hopes of cooling inflation rates. Reuters Federal Reserve correspondent Howard Schneider joined CBS News to discuss the global impact.
The Federal Reserve will hike its key interest rate to a much higher peak than predicted two weeks ago and the risks are skewed towards an even higher terminal rate, according to economists polled by Reuters. That change in expectations came after the Fed raised rates by 75 basis points last week for the third straight meeting and foresaw going higher than it had previously thought to tame inflation, which is running over four times above target. Since then, already battered global stocks went much deeper into bear market territory - a decline of 20% or more - on fears of recession and most currencies weakened further against the multi-decade high dollar.
- Business Insider
Wharton professor Jeremy Siegel says the Fed's rate hike campaign is so extreme that recession risk is much higher than risk of the central bank 'waffling' on inflation
"Honestly, Chairman Powell I think should offer the American people an apology for such poor monetary policy he's pursued," Jeremy Siegel said.
- LA Times
The Fed isn't giving the economy time to absorb its rate increases before imposing more pain. That could leave people jobless for no reason.
The spectacular fall in the British pound and U.K. government bonds over the past month was sparked by a dramatic policy decision to borrow billions to cut taxes to supercharge growth. But it is the culmination of years of deterioration.
Chicago Fed President Charles Evans on Tuesday gave a spirited defense of the dot plot as he said rates may need to plateau next year.
- Business Insider
BlackRock says it's time to 'shun most stocks' with markets underestimating the risk of a Fed-induced recession
Last week's rate-hike blitz shows central banks will trigger a recession to tame inflation, the asset manager said.
(Reuters) -The U.S. Federal Reserve will need to raise interest rates to a range between 4.50% and 4.75%, Chicago Fed President Charles Evans said on Tuesday, a more aggressive stance than he has previously embraced that underscores the central bank's hardening resolve to quash excessively high inflation. Evans also said that he does not see "recession-like" unemployment rate numbers ahead, even as the Fed's actions result in below-trend economic growth and a softening in the labor market to bring inflation back down to the central bank's 2% goal. "My own viewpoint is roughly in line with the median assessment," Evans said in a speech to the Official Monetary and Financial Institutions Forum in London, referencing the Fed's latest quarterly summary of policymaker projections.
Some Fed officials are worried about how fast the central bank is raising interest rates to tame inflation.
LONDON (Reuters) -The International Monetary Fund openly criticised Britain's new economic strategy on Tuesday, following another slide in bond markets that forced the Bank of England to promise a "significant" response to stabilise the economy. Pressure piled on new finance minister Kwasi Kwarteng to reassess his policy, which unleashed turmoil in financial markets, as leading economists, investors and executives said that rock-bottom investor confidence would recover only if the plan was scrapped. New British Prime Minister Liz Truss of the Conservative Party came into office on Sept. 6 saying she wanted to snap the economy out of years of stagnant growth with deep tax cuts and deregulation.
- Business Insider
Decades-high inflation has triggered a 'reverse currency war' as a soaring dollar leaves central banks scrambling to catch up
The Fed has set a blazing pace of rate hikes that policymakers around the world are trying to keep pace with.
- The Telegraph
The Bank of England’s chief economist warned it is crucial the Bank of England’s independence is respected as he signalled to volatile markets that significant interest rate rises are on the way in November.
(Bloomberg) -- Hungary will raise its key interest rate to a new European Union high as a standoff with the bloc over the rule of law complicates the central bank’s efforts to end its monetary-tightening cycle. Most Read from BloombergGermany Suspects Sabotage Hit Russia’s Nord Stream Gas PipelinesEverything-Selloff on Wall Street Deepens on 98% Recession OddsStocks, Commodities Drop; US Treasury Yields Surge: Markets WrapJohn Paulson on Frothy US Housing Market: This Time Is DifferentUK Market
"There's a lot of tightening in the pipeline," Kashkari said in a WSJ Live interview, referring to interest rate hikes already delivered but yet to have an effect on the U.S. economy and on price pressures. The Fed again raised interest rates last week and signaled that more rate hikes are on tap in the fiercest battle with inflation in 40 years. Kashkari said he believes markets have digested the Fed's intent to bring inflation down and that while monetary policy now is tight, it will need to be tighter still.
The Bank of Mexico is expected to raise its key interest rate to a record 9.25% this week, a Reuters poll showed Monday, following in the steps of the U.S. Federal Reserve's recent 75 basis points hike in a bid to tackle stubbornly high inflation. All 20 analysts polled expect Banxico, as the central bank is known, to raise its benchmark rate on Thursday by three-quarters of a percentage point from 8.50%, in what would be the bank's third-consecutive increase of this size. "In an environment in which pessimism in the financial markets continues, given expectations of greater tightening by the Fed, we believe that Banxico will continue to try to remain cautious, contributing to greater local stability," said Grupo Financiero Banorte.
Atlanta Fed President Raphael Bostic said Monday that the U.S. central bank hasn't lost credibility with the public.
Some policymakers are keen to press new rules on the decentralized finance sector following the collapse of Do Kwon's terraUSD stablecoin.
- Business Insider
The drop in the pound is sending UK rate expectations to 6% in 2023 - and that means a spike of 73% for some mortgage payments, economist says
The UK's key interest rate could soar to 6% in 2023 and that could mean some refinanced monthly mortgages will jump to £1,490 from £863.
(Bloomberg) -- US policy makers can probably sit and wait after bringing interest rates to a peak in March, and they may even avoid a recession in the process, Federal Reserve Bank of Chicago President Charles Evans said.Most Read from BloombergGermany Suspects Sabotage Hit Russia’s Nord Stream PipelinesEverything-Selloff on Wall Street Deepens on 98% Recession OddsStocks, Commodities Drop; US Treasury Yields Surge: Markets WrapJohn Paulson on Frothy US Housing Market: This Time Is DifferentGold
Neither the U.K. nor the world economy are coming to an end. But economic theory is straining to explain the forces at work, writes Larry Hatheway.
(Bloomberg) -- Federal Reserve Bank of Minneapolis President Neel Kashkari said the US central bank is committed to restoring price stability and its current pace of interest-rate increases is appropriate.Most Read from BloombergGermany Suspects Sabotage Hit Russia’s Nord Stream PipelinesPutin’s Mobilization Hits Russia’s Economy in Its Weak SpotsEverything-Selloff on Wall Street Deepens on 98% Recession OddsUS Housing Prices Fall for First Time Since 2012Stocks Drop for Sixth Session as Rate Wo