Previous post Next post

Central banks have taken off the gloves in the fight against inflation

Central banks have taken off the gloves in the fight against inflation. They’ll win but global growth will lose out.

The market is no longer convinced that global central banks can tame inflation without a major hit to growth. Maybe that's not a recession but it's a much slower growth paradigm than assumed.

We’re now pricing in terminal rates at the highest levels since before the financial crisis and the risks from there remain to the upside.

Initially, I expect the Bank of Canada to be as hawkish as the Fed but the housing market is structurally different in Canada and far more vulnerable to rising rates. That will cap how high the BOC can go.

The odds of a nightmare scenario for the Canadian housing market are rising. What could happen is the Canadian housing market begins to dive and the BOC cuts back to zero but the Fed keeps hiking. That would negate the BOC’s ability to cushion the fall. One solution would be QE but zero rates and more bond buying would dramatically undermine the loonie and spur inflation.

All central bankers are walking the tight rope between growth and inflation right now but for the Bank of Canada, there’s no safety net.
Facebook ►
Twitter ►
Homepage ►
Full story here Are you the author?
About Forexlive
Founded in 2008, ForexLive has been the go to source for both professional and retail traders from around the globe. Our core belief is that all traders want relevant and succinct trading information, and we deliver it 24 hours a day.
Previous post See more for 4.) Forex Live Next post
Tags: ,

Permanent link to this article:

9 pings

Skip to comment form

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.