Comment: I don’t know who inflation and the economy first poured investors to hear in

Source: Bloomberg

Author: Craig Stirling, Alice Atkins, James Hirai

When the U.S. and European Bank frequently hinted that a round of interest rate hikes, concerns about the economy, like clouds covering investors' minds.

Fed Chairman Powell hinted that it might still raise interest rates by 50 base points. The European Central Bank President Lagarde said "it is very likely" to raise interest rates by 25 base points.Many major central bank events that occurred this week made the financial market began to carefully consider the economic costs that could be continuously tightened.

Investors seem to be suspicious about the Fed's ability to escape the decline of the US economy.The 10 -year US and German Treasury yields are much lower than the 2 -year Treasury bond.On Thursday, the yield curve pursued the level of March in early March. At that time, it was the eve of the US bank crisis that stirred up the global financial market.

People are worried that the enthusiasm of the central bank's president will overwhelm the economy and be forced to turn the policy sharply when the price of price increases.

The European Central Bank knew this danger. However, the bank had suspended interest rates twice this century, and was later considered a wrong policy action.Another alert signal was that New Zealand announced on Thursday that GDP in the fourth quarter of last year and the GDP shrinking in the first quarter of this year.And New Zealand is one of the earliest countries to implement interest rate hikes.

"The Central Bank now seems to think that even if the economy is softening or has fallen into a recession, interest rate hikes still make sense," said Charles Hepworth, the investment director of Gam Investments."Policy errors are likely to be unexpected."

Faced with inflation pressure, currency tightening demand this month has infected the global central bank.Last week, Canada and Australia had unexpectedly announced their interest rate hikes.On Thursday, Australia's bond yield curve appeared for the first time since the financial crisis.

Although the Federal Reserve was fulfilled on Wednesday, the promise of not raising interest rates made by some officials hinted to investors that this year it will conduct two rate hikes of 25 base points.One of them may first appear in July.

The next day Lagarde also said that the European Central Bank was "very likely" to raise interest rates, although data a week ago showed that the euro area had fallen into a slight economic recession.

In view of these remarks, the currency market traders are expected to increase their interest rates to nearly 5.5%, the highest level since the beginning of the century.For the European Central Bank, they are expected to be at a level of 50%at 4%by October.

ANNA Stupnytska, Fidel's International Global Macroeconomic, said, "We believe that 3.75%of the peak interest rate forecast is raised."

At the same time, the economic recession continued until the first quarter, and the economic downturn in the euro area showed signs of economic downturn.Lagarde said economic growth has fallen into stagnation and will still be weak in the short term.

Although Ragard also realized that the previous fewer interest rate hikes had affected the financing environment and gradually penetrated into the economy, she still reminded that salary pressure is increasingly heating inflation.