| Amir Kahanovitz, Chief Economist, Phoenix-Excellence |
The Biden administration appears to be helpless in the face of continued inflation, re-examining the release of oil from emergency reserves, an operation that was already carried out last year but led to only measured and temporary effects.
The 10-year implication broke the 3% level last week for the first time in decades, and is supported by a spike in commodity prices, especially after Russia announced oil supplies in some deals for rubles, and an expected disconnection of its main oil pipeline at sea The financial for the purpose of “repairs” of six months.
If that is not enough then the Yemeni Hittites attacked oil facilities in Saudi Arabia and exerted pressure on the price. Thus, the world economy is not only facing high prices but also facing uncertainty regarding the existence of contracts.
Revovbank Investment Bank explains that although the Russian demand for rubles does not meet the contracts it signed, the killing of thousands of people does not meet any contract either.
Europe, like the US, is having a hard time disengaging from Russian gas, Germany has explained that such a disengagement would be an economic suicide for it.
Meanwhile data on world travel show that the high price of oil did not hurt American demand (but certainly annoyed them), slightly hurt demand in Europe, but shocked activity in poor countries like India and China and crashed demand in Russia and Ukraine.
American aid for the price of oil may perhaps come through subsidizing European countries, controlling prices, eliminating pollution restrictions (especially shale) or coming to terms with the communist administration in Venezuela and developing its oil reserves.
| Raising one interest rate per decision, two? … even three can be a winning number!
Bond market uncertainty is huge, investors are not finding anything to rely on, with inflation in the stratosphere. Last week, the door was opened to a double-digit outline in every decision, after Fed Chairman Powell said Monday the Fed would be willing to make large interest rate hikes if necessary. More in the coming meetings.
Following the developments Goldman Sachs (NYSE 🙂 we updated their interest rate outline forecast for a double interest rate hike in the next two resolutions and City updated for a double hike in the next four resolutions.
The yield jumped to 2.5%, and the contracts embody a cumulative increase of 200 basis points (2%) in the next six meetings.
As the capital market succeeds the new tier may also open a door to the tier of three raises in the decision.
James Bullard, president of the Fed’s branch in St. Louis, said he was looking at the 1994 rate hike pattern, so the Fed has already experienced a triple raise (of 75 points) in one decision.
In historical foresight the peak of the rise in yields occurred close to the date of the last interest rate hike, so it is still ahead of us, on the other hand the hike stopped shortly after the curve slope became negative, which is also very close.
| The fear of stagnation (inflation and recession) dissipates
Despite commodity price shocks and interest rate tightening, new figures show that the US economy is once again galloping forward.
According to analysts at Bloomberg, the companies’ profits will grow by 10% a year, every year until at least 2024 and will expand by 2% every quarter for the next six quarters.
Even the unprofitable technology companies, the ones that led the declines on Wall Street in the first two months of the year, changed direction and recorded increases of about 30% from the low! Even in Europe, the fear of stagflation is disappearing.
The bloc’s central bank president, Christine, said over the weekend that “so far, incoming data do not indicate a significant risk of stagnation,” explaining that eurozone output is recovering, back to pre-crisis levels, and continuing, and labor market data remains strong.
What Lagard also does not show is really exciting, she claims that the jump in inflation is due to factors related to the epidemic, and by disruptions in global energy prices related to the war, events that have an impact mainly in the short term.
The author is the Chief Economist of Phoenix-Excellence. This review is provided as a service to readers only, and should not be construed as an offer, recommendation, substitute for the reader’s professional judgment or investment advice or investment marketing, purchase and / or sale and / or holding of the securities and / or financial assets mentioned or of securities and / Or any other financial assets.