Central banks to unveil further ‘aggressive’ interest rate hikes

European, British and US central banks will unveil further “aggressive” interest rate hikes in the coming months as they step up their fight to tame inflation, a leading economics consultancy has predicted. .

Capital Economics predicts that the US central bank will sanction a further three-quarter point hike in its key rates next month and will not stop until rates hit 4.75%.

The consultancy also believes that all major central banks will remain focused for some time on “tightening policy and cooling price pressures”, leading to “further aggressive interest rate hikes in United States, the Eurozone and the United Kingdom over the coming months”.

The prediction comes despite expectations that the IMF, at its annual meeting in Washington this week, will step up its warning of growing risks of a global recession as the economy slumps under inflationary pressures.

Many economists are predicting the UK and eurozone economy will contract next year as central banks add to the pain for households and businesses, although parts of the eurozone like Ireland are likely to escape the squeeze. recession.

The European Central Bank and the US Federal Reserve will also be looking at services inflation lest price pressures spread far beyond energy and food prices, economists say.

On Monday, food and energy price markets reacted to the escalation of the war in Ukraine over the weekend. U.S. wheat prices hit their highest in more than three months as Russia’s attack on Kyiv and other Ukrainian cities stoked fears an escalation in the war would hamper exports agriculture outside the Black Sea.

“We cannot rule out further food security issues if one of the world’s major producers has production difficulties or if the situation in the Black Sea region does not improve,” Hightower analysts said. Report in a note to clients. Any slowdown in the Black Sea could push up global staple food prices, which had recently fallen.

Wholesale gas prices in Europe also rose, reversing a marked downward price trend last week. The price of gas for December delivery climbed nearly 5.5% to €176 per megawatt hour.

Global stock prices also fell on the prospect of sharp interest rate hikes and the war in Ukraine.

“But the new outrages in Kyiv are another reminder that European markets are facing an even tougher winter than those in the United States, despite the massive support provided (for energy bills) by governments,” he said. Chris Beauchamp, chief market analyst at online retailer IG. .

“The rebound is already running out of steam, with more pain for European stocks to come this quarter,” Beauchamp said.

The Ftse-100 fell nearly 0.5%, but many stocks in Dublin ended the session higher. International packaging giant Smurfit Kappa finished up 7%, while homebuilder Glenveagh Properties lost 2.25%.

Additional Bloomberg reports

Stephen V. Lee