Central banks hiking everywhere

Central Banks are raising rates across the globe

South Korea hiked by 25 points again today and the Reserve Bank of New Zealand hiked for the fifth time yesterday to 2.00%. These and other central banks have been adjusting interest rates appropriately. Taking a nuanced approach to the rebound from Covid and the impending inflation challenge that would pose.

Which is why the Federal Reserve and Reverse Bank of Australia have little excuse.

It is not the case that central banks everywhere have been behind this tsunami curve of inflation. Even before the extra price push of the Ukraine war, central banks like Mexico were pre-emptively raising rates. This puts those banks in a much stronger position to pause or relax policy if necessary as the global slow down intensifies.

Not so the RBA in particular. Which remains an incalcitrant and inept bank to say the least. Just a little bank by global standards, commercial and central, it nonetheless has among the world’s highest paid central bankers. Four times the Fed Chairman and only has lapses of judgement to show for these sky high salaries. Or is that sky high inflation? Stay tuned.

Yesterday’s US data saw New Durable Goods Orders stalling at a quite low level, and just as the release of Fed minutes showed quite aggressive rate hikes to fight inflation remain on the cards.

Being late as a central bank means raising rates more aggressively and higher than would otherwise have needed to be the case. Often just as as the nation is entering a slow-down created by the runaway inflation the bank allowed in the first place.

In Australia and the USA it is as if the central bankers purposefully engineered assert bubbles in both equities and property, in some form of perverse popularity contest.

Popular in the short term, finish one’s tenure, and leave the mess to the next incumbent.