Central Bank Policies Caught Between Hope and Despair: Can central banks get inflation under control without pushing the economy into recession? Recent developments point to further interest rate hikes in the US and the… monetarypolicy interestrates
A look at the stock markets at the end of the week proves it: investors are expecting further interest rate hikes in the US and the eurozone, while at the same time prices on the stock markets have corrected downward. While the Fed meeting minutes provided tangible evidence for the interest rate path, for the eurozone, inflation, which continues to be well above the target level, is seen as the main motivation for a resumption of rate hikes in July.
On Friday the Bureau of Labor Statistics reported the US economy added 209,000 non-farm jobs in June, which was softer than the 230,000 median in a Bloomberg survey. But wage pressure was evident in the report which showed average hourly earnings increasing 0.4 percent on a monthly basis in June, after they declined 0.1 percent in May.
SNB President Thomas Jordan has time before the Governing Board has to decide on its September monetary policy assessment. Even if upcoming data confirm easing price developments, the inflation-driving effects of rising rents, renewed electricity price hikes, and a higher VAT rate coming at the end of the year seem more likely to prompt the SNB to remain vigilant, Raiffeisen says. In addition to raising interest rates, the SNB will continue to use foreign exchange sales as a means to further curb imported inflation.
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