” Central banks are not fighting inflation, they are preparing for the next crisis “. John Plassard, director of macroeconomics and stock markets at Mirabaud, did he want to be provocative in pronouncing this sentence? Not necessarily.” In March 2021, when the US Federal Reserve considered inflation to be transitional, its head Jerome Powell answered a journalist’s question that interest rates Fed funds Thus, inflation will no longer rise temporarily and to prepare for the next crisis. The National Bank has already remembered that it is necessary to save ammunition in order to face a possible crisis and be able to reduce rates if necessary. “John Placer recalls before taking up the European Central Bank. ” Unlike the Fed, the ECB did not admit that it was wrong about inflation. First of all, she did not understand the strategy of her American counterpart and today is very late in the cycle of raising key interest rates.
When the Fed tripled the value of money three times in March to bring it back to a new range from 1.5% to 1.75%, after a “big” increase of 75 basis points on June 15, the ECB has not yet released. The announcement of the first increase is expected at the meeting on July 21, which is an eternity in the current market environment. ” If Germany got rid of Russian gas, it would be a guaranteed recessionsays John Plassar. However, the ECB does not have ammunition at the pond front, as it has not yet started raising them.. It seems that an increase of 25 basis points is planned. Will that be enough? It is very reasonable who can say this, but the market is putting pressure on the Frankfurt currency institution to increase by 50 basis points.
To the ideal parity between the euro and the dollar?
In the event that the action is found to be too lenient, the euro, already well weakened against the dollar, may receive an additional blow to the head and achieve perfect parity with the dollar. This situation will only exacerbate inflation, the development of which no one can predict. The proof is: if the Fed raised the rate Fed funds by 75 basis points this month, as the consumer price index, released a few days earlier, accelerated to 8.6% in one year in May. This came as a surprise, as the monetary institution sought to better meet the expectations of financial investors. ” The Will the Fed take a break from raising rates in September? John Plassar asks. No one knows, not even the Fed “. However, there is no doubt that inflation will remain high for a long time. And higher than the mandate of central banks. In the euro area, the ECB expects inflation of about 6.8% in 2022, then 3.5% in 2023 and 2.1% in 2024. Three estimates above its target of 2%.
The United States is soon in a technical recession
As for growth, it will be lacking. The United States may enter a technical recession in late June. The Atlanta Fed’s GDPNow tracker points to zero growth in the second quarter. Given the 1.5% decline in GDP in the first quarter, the world’s largest economy will fall into recession. ” Don’t be afraid of a recessionrelativizes by John Plassar. If we consider the period after the Second World War, the recessions have become less severe, with an average duration of 11.1 months. »