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Biggest rate hike in years expected as Fed tackles inflation

13 Comments
By CHRISTOPHER RUGABER

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The exception among major central banks is Japan, whose central bank has kept its ultra-low rates amid inflation that's weaker than in the U.S. and Europe. That is causing the value of the yen to drop as investors shift money to countries with higher interest rates.

The price of everything is rising in Japan and wages are not-it will get worse too!

-4 ( +2 / -6 )

It's all relative, if and when Japan start to see real long term growth and Inflation then the BOJ might start looking at raising it's rates, until then enjoy the ride if you are getting paid by USD$ while living in Japan.

-3 ( +1 / -4 )

That would be ideal Mark.

if you are working in Japan and are being paid the same salary as last year, you have taken a 20 to 30% pay cut.

0 ( +3 / -3 )

Weren't government economists all saying this was temporary a few months back? Awkward.

Increasing interest rates isn't going to work the way it used to. This time, inflation is not being caused by socio-economic factors but by political ones: Putin and the energy sanctions. So up the interest rate to 15% if you want, it still won't work.

They won't be able to engender higher unemployment as nations have chased away migrant workers with Covid repatriations (and Brexit) and aren't letting them back in. Local workers are not filling in all the gaps though, so there are shortages (increasing prices further), services are fracturing and companies are going under. But that still won't cause unemployment to rise fast or far enough.

quote: Inflation has spread to nearly every corner of the economy.

Because everything we do requires energy and energy prices have been artificially hiked. Good news if you are Saudi. Arab nations were glum as the world walked away from oil. Now it has shot up in price and they can get much richer flogging it to Russia's old customers.

Cost rises lead to price rises which lead to strikes and wage rises, creating a toxic spiral. In the UK, one group of bin men went on strike until they got wage rises of around 25%. Other bin men will expect parity with that, so expect more bin strikes.

Leaders won't bump off Putin because he is a member of the leader's club and it is against the rules. As that is the only thing that would end the economic damage (and the death and destruction of course), expect everything to keep rising for a year or two. Interest rates will rise as well, so check your mortgage and see what that means for you at rates of 5% to 15%. Even then, if inflation tails off, prices won't go down again, just up by a bit less.

The good times are well and truly over. Don't forget to thank your glorious leaders for doing this.

4 ( +5 / -1 )

They will leave some room for more rate hikes the rest of the year to get inflation under control. Probably another year or so to get US inflation back in the sweet spot.

-3 ( +0 / -3 )

GBR

Wrong, the price rises are caused by the huge inflation of the money supply around the world.

Yes, the war may have exacerbated some supply side shortages, but the primary cause is lunatic monetary policy, especially in the US, EU, UK and Japan.

And it is here to stay for quite some time to come.

Only thing government could do is stop spending and encourage BoJ to stop printing. Giving money directly to consumers will only make things worse.

Raising rates a couple of percent will do nothing to make things better

5 ( +5 / -0 )

It's all relative, if and when Japan start to see real long term growth and Inflation then the BOJ might start looking at raising it's rates, until then enjoy the ride if you are getting paid by USD$ while living in Japan

Only a minute minority receive US dollars in Japan.

The majority have nowhere to to offset the inflation that is coming....

-2 ( +1 / -3 )

The market is expecting a 0.75% interest rate rise. So the Fed will raise interest rates by a full 1% to surprise the market. Just watch the puny yen slide on its next downward path.

-10 ( +1 / -11 )

The exception among major central banks is Japan, whose central bank has kept its ultra-low rates amid inflation that's weaker than in the U.S. and Europe. That is causing the value of the yen to drop as investors shift money to countries with higher interest rates.

The rest of the story, as of this afternoon?

A shift in perspective may be in the works, as the government now says that it hopes that the central bank will take “necessary measures appropriately” in light of the currency’s sharp fall, combined with the uncontrollable rising cost of living. Pressure on the BoJ from the finance ministry, who is telling reporters that “currency intervention, or any other available options” are not ruled out. Which is different from BoJ’s own Haruhiko Kuroda, who insists that Japan must not target exchange rates in guiding policy.

Results: The bank continues full speed ahead with its expanded bond buying operations; BoJ has ramped up bond buying for a wide range of maturities to defend its yield cap on the 1 ten year JGB. In addition to an unlimited fixed-rate buying that covers three latest ten year JGB issues, it also added to the list of purchase targets JGBs with over seven years until maturity.

Foreign investors read the tea leaves to means that BOJ may tweak its current yield control policy afterall, and started selling JGBs, resulting in even greater upward pressure on interest rates. Which, when combined with a falling yen and a sense that ‘everybody else is doing it’ among other major central banks, lends itself to even more pressure on BoJ to intervene. All of which, historically, was the rationale that BoJ uses to show why intervention is ill advised.

Hope this helps to show what is happening behind the curtain.

0 ( +0 / -0 )

Weren't government economists all saying this was temporary a few months back? Awkward.

Indeed, they were saying that last year.

This time, inflation is not being caused by socio-economic factors but by political ones: Putin and the energy sanctions. 

But that doesn’t square with what you already said about claims last year that inflation was going to be “transitory”.

Putin’s war didn’t help, but it wasn’t the trigger of the inflation, according to a calendar of events.

2 ( +2 / -0 )

People don't get it!!! Did they expect the good times to continue to roll. We were for warned that this was coming and people I know went and bought over priced homes, then used them as a piggy bank to get equity out of them to go on nice trips and by fancy cars just to say they arrived. Well these same people are now claiming they wish they had of not done what they did because they see they are right back where they started and are facing a downward trend in real estate prices which means the value of their homes will be less than what they bought them for and now they are upside down. If they tried to sell them they would have to sell them for less or pay the difference. Many are worried as gas prices continue to rise and interest rates those nice cars and SUV s they bought well they sit in front of their homes or in the drive way gas is too expensive to waste unless one is going to work.

1 ( +1 / -0 )

You get what you vote for. Remember this in the upcoming election cycle.

Definitely. Don't vote for liars or people that suppress voting. Those are "Character" issues that the GOP is failing. Policy comes 2nd with liars. They cannot be trusted and that matters more than anything else.

0 ( +0 / -0 )

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