Hello. Today we look at the challenges of setting interest rates in emerging markets, profile a top European central banker and ask if supply chain strains are easing.
A Thankless Task
Former Mexican Finance Minister Arturo Herrera can perhaps count himself lucky that President Andres Manuel Lopez Obrador unexpectedly revoked his nomination to run Banxico.
Those already responsible for setting interest rates across Latin America are trying to tackle the world’s fastest inflation. In Turkey, President Recep Tayyip Erdogan is virtually setting policy for central bank Governor Sahap Kavcioglu.
Let’s look at Latin America first. Wall Street banks are forecasting average cost-of-living increases there will end the year above 10%, according to Maria Eloisa Capurro’s report.
In Brazil, prices for chicken and eggs were about 29% higher in October from a year earlier. In Mexico, cooking gas costs 8.2% more than the previous month.
In response, central bankers have already embarked upon some of the most aggressive interest-rate increases in the world.
But so far that’s done little to quell expectations for ever-rising prices.
While frayed supply chains are a problem for policy makers everywhere, one issue specific to the region is the self-fulfilling prophecy of expectations for things to get worse, a mindset fueled by swift price increases in decades past.
“Latin America has a longer history than most with inflation and that has a relevant impact on expectations," said Andre Loes, chief economist for Latin America at Morgan Stanley. "People do have memory of those years.”
Moving to Turkey, a presidential push for lower rates has left inflation running at 20%, the lira on the skids and small protests erupting.
Erdogan’s lobbying of Kavciogluis was intended to turbo-boost growth, create jobs and revive his flagging popularity ahead of elections in 2023, according to Onur Ant's analysis.
But the resulting price shocks are having the opposite effect. After two decades in power, Erdogan's party could be facing a point of no return, but not before the central bank faces even greater pressure to ease more.
The Economic Scene
Is Isabel Schnabel the world’s most interesting central banker?
That’s what one economist reckons. A member of the European Central Bank’s Executive Board, Schnabel finds herself often selling the euro-area’s monetary policy to the famously hawkish German public.
Alexander Weber profiles her here at a time when inflation in Germany may be surging close to 6%. And read our interview with her from earlier in the week here.
More Must Reads
- Coming up | The pre-Thanksgiving dump of U.S. economic data occurs today. On the slate are initial jobless claims, the Federal Reserve’s preferred gauge of inflation, durable goods orders, the University of Michigan’s confidence indexes and the minutes of the last Fed meeting.
- Kiwi hike | New Zealand’s central bank raised interest rates for the second time in two months and signaled it will need to tighten policy more quickly than previously expected to contain inflation.
- Stability call | China’s top economic official called for stabilizing house prices while sticking with curbs on speculation as a property market slowdown continues to take a toll on the economy.
- German confidence | Sentiment tumbled to a seven-month low in November, with a new wave of Covid-19 infections looming.
- Logjams ease | President Joe Biden said that bottlenecks in the U.S. supply chain are seeing relief after his administration moved to improve operations at ports.
- Permanent prices | Inflation pressures are back for good and central banks will need to withdraw stimulus to prevent prices spiraling, former Bank of England Governor Mervyn King warned.
- Fed diversity | President Joe Biden wants “new diversity” and the Fed. Read our rundown of potential economists who could help him fulfil that ambition.
Need-to-Know Research
Biden may be right to feel optimistic about U.S. supply chains easing.
According to Bloomberg Economics, the crunch that helped drive U.S. inflation to multi-decade highs shows some signs of improving.
A U.S. gauge declined in October, while remaining at a historically elevated level, suggesting shortages are becoming less severe.
But the situation is getting worse in Europe.
Read the full research here on the Bloomberg Terminal.
On #EconTwitter
Some Thanksgiving humor...
Read more reactions on Twitter
Enjoy reading the New Economy Daily?
- Click here for more economic stories
- Tune into the Stephanomics podcast
- Subscribe here for our daily Supply Lines newsletter, here for our weekly Beyond Brexit newsletter
- Follow us @economics
What's Happening in the World Economy: Emerging Markets Suffer Price Shock - Bloomberg
Read More
No comments:
Post a Comment