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THE WORK OF CENTRAL BANKS (0808 GMT)
The Fed hasn’t yet started raising interest rates, and in
the euro zone, higher rates are likely many months away. But
markets have started doing the central banks’ jobs for them —
an index of financial conditions compiled by Goldman Sachs is
around the tightest since May 2020.
Look at the metrics feeding into such indexes — since the
start of this year, oil prices, government borrowing costs and
yield premia on corporate debt have all risen
. With markets pricing rate rises ahead,
world stocks are down 6%.
How financial conditions behave, inevitably impact the
spending, saving and investment plans of businesses and
households, so the more conditions tighten now, the less central
banks may need to do later.
JPMorgan analysts reckon, therefore, a 25 basis-point rate
hike is what the Federal Reserve will deliver next month,
rather than the 50 bps that is priced.
Still, analysts’…
