Global central banks expected to increase rates this week
Yahoo Finance's Jared Blikre breaks down Wall Street expectations for upcoming central bank policy changes.
Video Transcript
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- The Fed is the only game in town this week, but it's worth remembering that almost 90 central banks have raised rates this year, many by 75 basis-points a pop. The global fight to try and fight inflation, against inflation. The Bank of England, the SNB, and risk banks spring to action in the coming days. Yahoo Finance's Jared Blikre is here to break it all down for us. Jared?
JARED BLIKRE: Yes, well, let's take a look at the 13 week T-bill yield. Because, guess what? We got the Fed. They might be the only game in town, but we've got some other central banks that are, I guess, dripping some rate decisions this week.
And you can see, here is a 113-week T-bill yield. This tracks the Fed funds. That is the benchmark rate that the Federal Reserve uses. You can see it's that 3.02%.
When that reaches 3.47% or whatever the 10-year is at the time, that will be a precise flattening across the board for the yield curve, the short end with the long end. Now, we can see here, we are testing the highs of several months ago. But I just want to show you, I gathered some charts from Bloomberg that speaks as to what exactly is going down with some of these central banks.
And first, we've got to start out with the inflation data. So this shows consumer prices in the US, the euro area, and the UK. And we can see they already peaked potentially in the US. They could inflect back up again.
Not so with the EU. And with the UK, very high on the inflation meter. Now, I want to show you, these are the countries across the world that have hiked 75 basis-points, that's 0.75 basis-points or more in one move this year.
And you see it's a pretty broad swath of the entire world here. Some commodity currencies such as the Australian dollar and New Zealand dollar notably absent. And here is what's going on this week. So a lot of action.
But at the end of the day, people want to know, when is the Fed and other central banks going to ease? And that's kind of the key question right here. And for that, I just want to show you a couple of heat maps with regard to our currencies. This is the US dollar.
This is how much the US dollar has gained versus certain currencies around the world. Argentina and peso, that's up 40%. The US dollar is up 40%. We take a look at the Turkish lira, it's up over 30%.
And then here is the key one, the Japanese yen. The US dollar is up over 24% versus the yen. And Akiko, we've been talking about this, at some point, this has got to break. This has got to reverse, because there can't be that much easing by 1 central bank, the yen.
So to answer the question that we began with, what is a central bank that we care about that's going to ease first? Well, maybe it's already easing in a certain way because it hasn't turned the screws, and that would be the Bank of Japan. So for me, that's where the bellwether is.
- Yeah, I mean, you get the sense that the BOJ is really in a bit of a bind, right?
JARED BLIKRE: Yeah.
- I mean, a lot of this is the dollar move. There's only so much.
JARED BLIKRE: Well, when they're in the same class as the Argentine peso and the Turkish lira, yeah.
- Yeah. Not often we talk about all these currencies, but that point to where we are right now. Thanks so much for that, Jared.
