TLDR: The European Central Bank and the Bank of England both slowed their official interest rate hikes overnight to 50 basis points from 75 basis points, mirroring the US Federal Reserve’s slower pace of tightening earlier in the week.
But hawkish language from both Fed Chair Jerome Powell and ECB President Christine Lagarde in their post-hike news conferences unnerved traders and investors in Europe and the United States this morning. They fear central banks are now over-reacting to inflation just as it’s starting to slow in response to hikes earlier in the year. They worry policymakers will unnecessarily drive the world’s largest economies into unnecessarily deep recessions next year. I do too.
The S&P 500 was down 2.5% at 9 am NZ Time, in part because of weaker-than-expected US retail sales data for November. European stocks fell 2.85% overnight and Germany’s 10 year bund yield rose 27 basis points to a 14-year high of 2.4% after the hawkish comments from Lagarde. The NZ dollar also dropped sharply on waning appetites for riskier currencies. It fell 2% to 63.2 USc.
FYI to paying subscribers to The Kaka, this is my last Dawn Chorus of 2022 and the regular Friday Ask Me Anything session at midday and the ‘Hoon’ webinar at 5pm are back for the last time this year. Peter Bale and I will co-host an end-of-year special ‘Hoon’ for an hour at 5pm that highlights the years biggest events in geo-politics, the global economy and Aotearoa’s own local political economy, including some special guests. Watch out for the invites in email inboxes just before midday and 5pm. The Hoon link is here.
Elsewhere in the news here and overseas overnight and this morning:
Listen to this episode with a 7-day free trial
Subscribe to The Kākā by Bernard Hickey to listen to this post and get 7 days of free access to the full post archives.
