Page 7 - TURKRptJun22

The ECB’s main policy rate (Euro area deposit facility rate) has been in negative territory since 2014. The last time when the ECB attempted to hike its policy rate was in 2011. Greece, Ireland, Spain, Cyprus and Portugal, as a result, bankrupted.
Inflation in the Euro Area extended its record-breaking series to a seventh consecutive month with 8.1% y/y in May. Producer price inflation reached 37.2% y/y in April.
On March 16, the Fed hiked its policy rate by 25bp to 0.25-0.50% from 0.00-0.25%.
The Fed governors anticipated the delivery of six more rate hikes in the remainder of 2022 to bring the policy rate to 1.75-2.00%.
In December, the Fed governors expected the delivery of three rate hikes in 2022 that would bring the policy rate up to 0.75-1.00%.
On May 4, the Fed’s open market committee hiked its policy rate by 50bp to a band of 0.75-1.00%.
In addition, the Fed would begin reducing its balance sheet as of June 1, with a monthly cap of $47.5bn by September and $95bn starting from September.
At his press conference, Fed governor Jerome Powell ruled out 75bp hikes.
On June 15, the Fed’s open market committee is expected to deliver another 50bp rate hike following its next meeting. Updated projections from the governors will also be released.
Annual CPI inflation in the US declined to 8.3% in April from 8.5% in March. As of June 5, average gasoline price in the US was up 59% y/y to a fresh record high of $4.85 per gallon.
Note that more than $2 trillion has already been printed. It presently resides on the Fed’s balance sheet under the Treasury General Account (TGA) and the Reverse Repo (RRP) account. When the Fed zeroes its net money printing volume, this money will continue flowing into the system.
Since May 4, Joe Biden has been talking about reducing the budget deficit. The finance industry’s big dream, namely, the pumping in of money via fiscal policy instead of monetary policy, is now a broken dream.
Tightening via both monetary and fiscal policies will mark out the upcoming period. How long it can possibly last will be under observation. There is already talk of ending rate hikes in September.
Via monetary or fiscal policy, the money printing must proceed; or the world will enter a crippling recession that will bring political costs.
Currently, inflation is also bringing costs. So, via both ways, social tensions will keep on rising.
Wars, of course, can solve policymakers' woes. The Ukraine War has gotten a bit stale. Bigger wars are required to support economies and manufacture consent among the masses.
7 TURKEY Country Report June 2022 www.intellinews.com