The head of the ECB recently announced further interest rate hikes.
(Photo: Reuters)
Unfortunately, no one rings the bell in time when the markets begin to stage a thorough recovery. Often the recovery comes inconspicuously, even hesitantly – but then the train is already moving and you are annoyed that you didn’t jump on sooner.
That’s why the question keeps coming up: where do we stand? Will we soon see a turnaround in monetary policy and with it a sustained recovery in the markets?
There have recently been two signs that the central bank tightening cycle could soon be coming to an end. At one point, monetary policymakers in Australia raised interest rates by just a quarter of a point, half as much as expected. This reflects the concern that a global monetary policy that is too tough will lead to a recession.
And then in August, the number of new job openings in the US fell at the sharpest rate since it was more than two years ago. That takes some pressure off the US Federal Reserve (Fed) to continue on its tight course.
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Even if the much hoped-for turnaround in monetary policy is perhaps on the horizon, it is not yet within reach. The central banks, above all the Fed, have only just regained their credibility as inflation fighters after initially underestimating the price pressure.
Recession as the greatest risk
You’re not going to jeopardize that win right away. Also, one must not overlook the fact that as long as inflation is low, real yields, at which price inflation is accounted for, will also remain low. Real yields only rise significantly when inflation falls. In this respect, monetary policy is still looser than it appears at first glance.
Recession is now the biggest risk, especially in Europe. We’re dependent on energy here, and it’s getting scarce. Markets may have priced in too much hope of an end to tightening and too little concern about weak economic activity.
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