The recent statements of the major global central bankers have been clear: inflation will remain for a long time and price cuts will require a great deal of effort and the economy will most likely enter a recession with weak jobs.
It is remarkable that central banks have spent decades building their credibility to the markets that they are able to combat inflation and build a stable environment in terms of price stability for consumers. But this time may be different for monetary policy holders with several factors outside the control of central banks.
First there is the Russian-Ukrainian war, which in turn affected the rise in energy prices. In addition to creating a shock in the supply.
According to Archyde.com, the supply chain crisis is expected to worsen with the realignment of alliances due to war, demographic changes, and increased costs for companies as they head to production in emerging markets.
The markets have also recently witnessed large spending by governments, especially with regard to stimulus packages related to enhancing consumer confidence with the outbreak of the Corona virus in 2019… One of the studies presented at the Jackson Hole symposium argues that 50% of inflation levels in the United States are due to the government fiscal deficit and that The Federal Reserve will not be able to control prices without government cooperation.
Finally, analysts expect the dollar to continue its gains once morest a basket of other currencies, which may lead to a rise in inflation globally, specifically in emerging markets.
Among the most prominent statements that negatively affected global markets are those of Federal Reserve Chairman Jerome Powell, who confirmed that he will raise interest rates strictly and that these decisions have difficult repercussions and consequences for the economy.
It is noteworthy that inflation in America is at the highest level in 4 decades, while in the European region it is the highest in history. And in Japan, it rose for the eleventh consecutive month, the fastest growth rate since April 2014.
