?? Worrying inflation
?? World economy in recovery mode
?? US interest rate turnaround expected in 2022
In order to alleviate the economic stresses caused by the corona pandemic, the international central banks have opened their money gates wide. The US Fed, for example, has cut its key interest rate to the extremely low range of 0.0 to 0.25 percent, and the ECB has also kept the key interest rate for the currency area of the 19 countries at the record low of zero percent since March 2016 and has even exceeded that further measures taken to provide the markets with additional liquidity.
But the increasing return of the US economy to normal operations after the Corona crisis, combined with the enormous stimuli from the government and the monetary authorities, is having an impact on inflation. The inflation rate has now reached such a high level that it is worrying market participants. There is correspondingly great interest in the question of when the monetary authorities will initiate the interest rate turnaround.
Strong growth in 2022
After the global economy had already grown strongly in 2021, the experts at Goldman Sachs assume that the positive development will continue in the new year – albeit at a somewhat slower pace. Driven by medical advances, pent-up consumption and stockpiling, the global economy is expected to grow by 4.5 percent in 2022, the US investment bank believes. In the industrialized countries in particular – with the exception of the euro area, where the third quarter was very strong – a significant acceleration is expected in the short term, which should continue into 2022, according to the bank’s annual outlook.
First rate hike in the US
Goldman Sachs economists admit in their report that they were surprised by the sharp rise in prices. Because of this development, they are now anticipating an initial rate hike by the US Federal Reserve in July 2022 – a whole year earlier than the experts originally forecast. However, in their opinion, the road to significantly higher interest rates is still a long one. Because the GS bankers do not expect a second increase until November 2022 and then only two further interest rate hikes in each of the following years. They justify this leisurely pace with the fact that, in their opinion, inflation should normalize.
ECB is lagging behind
Meanwhile, the process of moving towards normal interest rates in some other developed countries – including the UK and Canada – would be faster. And in some Latin American and Eastern European countries, the tightening of monetary policy could even be nearing its end, GS explains in its outlook for 2022.
In contrast, the Central Bank of Australia (RBA) and the ECB are still a long way from a rate hike. The GS experts do not expect a first rate hike in Australia until the final quarter of 2023 and in the euro area not until the third quarter of 2024.
Finanzen.net editorial team
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