Central Banks in 2022 by ING Global Economics Team CentralBanks Macroeconomics MonetaryPolicy
It may seem odd timing given the emergence of the Omicron Covid variant, but Fed Chair Jerome Powell has acknowledged that it is time to retire the “transitory” description of inflation and is now mulling the potential for a swifter conclusion of QE tapering that would also open the door to earlier interest rate increases.
Nonetheless, there is clearly the potential for the announcement to come in December if scientific evidence suggests we are not entering a darker period for the pandemic. At present, we are sticking to our two 25bp hike call for the second half of 2022, but if the all-clear is sounded we would imagine three hikes is far more likely.The fourth wave and the Omicron variant have complicated the ECB's life and more particularly its path towards the exit from the emergency measures.
We are forecasting a rate rise in February and August, which would imply the Bank also begins reducing the size of its balance sheet by ending reinvestments. A third move – taking Bank rate to 0.75% – is possible in 2022. Remember though, if policymakers are divided on whether to hike rates now, there’s unlikely to be consensus for the sharp adjustment in interest rates that markets have long been expecting.
have recently indicated some more confidence in the path of inflation. But with core inflation excluding food and energy recording a 0.7% year-on-year decline in October, we don’t share this confidence.The Bank of Canada decided to end QE in October and brought forward its guidance for the timing of the first rate hike to mid-2022. The economy is growing strongly and inflation will soon breach 5%.
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