Opinion: Shock US inflation a rude reality check for already shaken markets | Stephen Bartholomeusz
After Friday’s shock inflation readings, the US Federal Reserve Board meeting that starts on Tuesday is predestined to produce an outcome that will further destabilise shaken markets and add more pessimism to an already-gloomy global economic outlook.
That news drove European bond yields up – particularly those issued by southern European governments – again raising the spectre of divergence and fragmentation of the European Union that has periodically erupted in the post-200 financial crisis era.ECB president Christine Lagarde foreshadowed a 25 basis point increase in the bank’s policy rate at next month’s meeting, followed by more rate rises later in the year, in response to a surge in inflation that the ECB estimates will hit 6.
What happens in America is, of course, of great significance to the Europeans and the rest of the world because a more aggressive approach from the Fed – and it is inevitable that the latest inflation data will force a more aggressive approach – will impact the rest of the world via capital flows, US dollar borrowing costs and exchange rates.
Across Asia and the rest of the heavily-indebted developing world, the combination of the strong dollar, rising interest rates, sky-high energy prices and the global economic slowdown is threatening., because of their effect on currency relativities and, should their currencies weaken significantly, the prospect of importing inflation via higher import prices. The Fed’s decisions heavily influence global monetary conditions and policies.
The overall sharemarket is now down about 18.7 per cent since the start of this year and the technology stock-heavy Nasdaq index 28.5 per cent as what had been – for nearly 14 years – the safety net provided by the Fed’s sensivity to market volatility has been withdrawn. The rebound in the US inflation rate came after what had appeared to be encouraging signs that the worst of the supply chain issues that helped ignite the outbreaks were easing, with semiconductor prices falling and the cost of shipping containers also declining sharply. The consumer binge that was a feature of the pandemic and post-pandemic environments also appeared to be losing momentum.
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Shock US inflation a rude reality check for already shaken marketsInflation in the US and elsewhere now appears entrenched and spreading beyond the impact of dysfunctional supply chains and soaring energy prices. | OPINION by senior business columnist Stephen Bartholomeusz
Read more »
US futures fall as inflation shock saps sentimentUS equity futures slid on Monday following a surprise American inflation print that heaped pressure on the Federal Reserve to intensify monetary tightening.
Read more »
China's 'dangerous' behaviour towards RAAF planes should 'worry us all', US Defence Secretary saysThe former US army general says there has been 'an alarming increase in the number of unsafe aerial intercepts and confrontations at sea by PLA aircraft and vessels'.
Read more »
Respected epidemiologist honoured on Queen’s Birthday reflects on shock diagnosisIt was 3am and Professor Mary-Louise McLaws was awake working, waiting for another online meeting to start with experts at the World Health Organisation, when she developed a sudden strange headache.
Read more »
Respected epidemiologist honoured on Queen’s birthday reflects on shock diagnosisIt was 3am and Professor Mary-Louise McLaws was awake working, waiting for another online meeting to start with experts at the World Health Organisation, when she developed a sudden strange headache.
Read more »
NRLW player reveals rare cancer battle after shock diagnosis: ‘I just jumped’.BrisbaneBroncos player Toni Hunt has gone public with her ongoing cancer battle after a whirlwind day in March flipped her life upside down. NRLW 7NEWS
Read more »