Hello my friend. As many of you know, yesterday a relative of mine had a motorcycle’s accident (the other veichle was a truck). Fortunately he is alive but he’ll need at least 3/4 months to be fine 100%.
I was writing my weekly, that I did’t end (needing to leave immediately the office). Today from home I finded that piece. It’s only the first macro/narrative part that I send you the same.
As always if you like my job/analysis please subscribe below and share it and I remember you that I am also on twitter at @Credit_Junk. And now let’s see what happened this week.
MACRO/NARRATIVE:
If I need to choose a title for this week it should be “The central banks week” and this is for a reason.
Remaining on the most important one, this week we had:
BOE: on monday BOE was the first central bank to move. With an increase of 50bp but a splitted board (one member voted for a 25 basis-point hike, three voted for 75 basis points, and five opted for 50 basis points). They approved also to start selling government portfolio. The problem is that this overlap with the deficit program of the new government of Truss: this one announced an expanded stimuls with an increase of gilt gross issuance above £190bn this year and above £250bn next year (well above expactations).
This trend of increase fiscal deficit (what I call the end of austerity) against a tight monetary policy is a trend that will continue, with many government that will continue to subside consumers and business against the increase in energy bills.
FED: increased by 75bp at this meeting (as expected) with almost sure an other 125bp incrase until the end of the year (probabily 75bp + 50bp). The true hawkish part was the dots (where almost all voters with a terminal rate for 2023 between 4.5% and 5%). The Fed is committed to fight inflation and to do it, they will mantain rates above neutral for a while (with Powell using a similar tone of Volcker saying: “We will keep at it”). In their economic projection (despite being a bit optimistic) they are ready to face a recession and a high level of unemployment to win their battle.
BOJ: mantained rates stable and YCC as in the past, with Kuroda affirming they won’t hesitate to add easing if needed. While on FX, during the week, after testing the market last week, in this one they acted selling dollar to buy Yen.
SNB: despite being the country with the lowest inflation, central bank hiked 50bp, exiting ufficially from the list of countries with negative rates
It’s all for this week!
Have a great weekend, the life is too short, enjoy it and smile every day!