The hiking rate means the break will not be taken later

The hiking rate means the break will not be taken later

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The determination to be tough on inflation these days is such that the risk of being portrayed as a dovish regardless of qualifications is also a stigma.

The relentlessness with which many central banks are slowly raising interest rates in the global economy shows that is consistent, although there is little reward in the move. It is not considered whether the officers in question were among the first to begin withdrawing the epidemic-era stimulus. By 2023 – or earlier – the risks are increasing as a result of overdoing it and being forced to cut-and-cut it.

The world’s first two hikers, the Bank of Korea and the Reserve Bank of New Zealand, have not signaled an imminent end to the war on rising prices. BOK, which started raising rates in a quarter-point step almost a year ago, stopped growing on Wednesday: the bank raised its benchmark rate by half a point to 2.25%. This makes it less significant as has been predicted by a majority of economists. The new chief, Ri Chang-yong, has clearly decided that inflation is above the target, measured and fixed, with the risk of coinciding with the risk. Rhe held the possibility of returning in small installments, but insisted that inflation was too high. The RBNZ has unveiled half-percentage points of its third gradual growth and hinted at more to come. “The committee is committed to ensuring that consumer inflation returns within the target range of 1-3%,” the central bank said in a statement, acknowledging a weak global growth picture. Rising prices are the closest enemy; Relaxing activity is more remote. Like their opponents in Seoul, New Zealand officials nonetheless warned of a hit on home prices.

What is noticeable among these activities is that the two are experiencing significant erosion in growth and possibly recession. Yes, inflation is too high; In June, Korean consumer prices rose the most in a generation. No central banker wants to be cursed by history who was so stupid and let alone consumer and business psychology, letting skyrocketing prices be included in decisions. Not even Wellington and Seoul outlaws: the Federal Reserve is weighing in for the second consecutive 75-basis-point increase this month, the European Central Bank is moving towards lifting and Singapore is tightening. The Reserve Bank of Australia’s ink was just as dry on the 25-basis-point label as “business as usual”, at a rate twice as fast as it had switched. Quarter-point moves that once expressed invisible but worthy determination are now out of fashion.

It’s beautiful. Just as inflation is detrimental, so is economic recession. The danger is growing in both South Korea and New Zealand. Korean consumer confidence has declined; Nomura predicts that the economy will shrink this quarter. The RBNZ has forecast a significant downturn in growth next year, and a rate cut in 2024. Kiwi officials do not deny the word “R”, nor do they guess it. There is little relief in the middle of the road: the central bank and the governments do not admit that they have overdoed it until there is a downdraft on them. Soft landings are widely called, but difficult to close. Disagreements are not in their favor.

Both countries will already be victims of the global recession. The International Monetary Fund has projected 3.6% global growth this year. It sounds fairly strong and much better than the steep contraction of 2020. But the momentum is not promising; From the first day of Covid-19, the lender’s forecast in April was the highest. On Tuesday, the IMF cut its monthly forecast for US expansion to 2.3% this year. The fund has historically viewed the world’s growth of about 2.5% or less as a recession. Are central banks heading for recession as inflation is seen as the number one enemy of the people, despite orders from many to be concerned about employment?

The two nations are the embodiment of the modern world economy in their own way. South Korea is an important part of the technology supply chain, accounting for about 40% of total domestic exports. Its population is shrinking and officials have expressed concern about the skyrocketing cost of housing. New Zealand advanced modern inflation three decades ago. In a small, open economy there is an unexpected ability to move quickly and rapidly to break price growth, just to reverse the trajectory almost as fast.

Probably the most troubling – and surprising – question raised by Kansas City Fed President Esther George is the rapid pace of austerity. He has gained a reputation over the years as one of the most hockey members of the Federal Open Market Committee. When George reveals reservations that things could go too fast in the United States, it’s worth paying attention to. “This is already a historically fast pace of rate hikes to adapt to family and business, and further abrupt changes in interest rates could create stress in the economy or financial markets,” he said in a speech on Monday. It is inconceivable that this time next year, we will continue to wonder how many declines are coming and with what urgency. Jumbo hikes are now in vogue, it can be seen as a last resort instead of the gold standard. More from this author and others in Bloomberg Opinion:

• J. Powell took Ben Bernanke’s advice a little too far: Daniel Moss

• US economy heading for hard landing: Bill Dudley

• ECB needs a powerful anti-fragmentation tool: Marcus Ashworth

This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.

Daniel Moss is a Bloomberg opinion columnist who covers the Asian economy. Previously, he was the executive editor of Bloomberg News on economics.

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