Global markets focused on the interest rate decisions to be made by the Fed and the European Central Bank. While the Fed’s rate hike in the USA was all included in the pricing, the debate on the 3 percent inflation target among economists flared up.
Stock markets enter the week in which the interest rate decisions of the two major central banks will be monitored with a positive atmosphere.
Asian stocks rose, led by Japanese indices, where the loose policy is expected to continue. China, on the other hand, diverges negatively before the Politburo meeting.
US stock futures are flat, while Euro Stoxx 50 futures are down. While the US bond yields did not change much in Asian transactions, the 2-year bond yield, sensitive to the interest rate decision before the Fed decision, was at the level of 4.852 percent.
Developed country currencies are flat against the dollar, with the Bloomberg Dollar Index at 1,215 points. While there was a weekly increase in oil prices for the fourth time last week, Brent oil started the week with a limited decrease at the $81 limit. Spot gold also entered the new week with a limited decline.
Economists’ debate on the inflation target.
While the US Fed is expected to increase interest rates, the issue of controlling inflation without creating a recession has been the subject of discussion among economists.
Former Fed Chairman Ben Bernanke said this week’s rate hike could be the final step in the Fed’s tightening cycle.
JPMorgan Chase Chief Economist Bruce Kasman stated that it would be difficult to remove price pressures from the agenda without creating a recession, and commented, “I don’t think inflation will fall below 3 percent permanently.”
The two economists, who were the first to warn the Fed that inflation is permanent, differ on the 3 percent inflation level. Allianz SE Economic Advisor Mohamed El-Erian said the Fed should keep inflation around 3 percent and not put the economy under pressure for the 2 percent target.
Former Treasury Secretary Lawrence Summers argued that targeting inflation above 3 percent would lead to stronger price increases in the next economic cycle.