All Major Central Banks Stop Price Hikes

All Central Banks Stop Price Hikes For The First Time In Years

Most of the central banks around the world are now stepping back from increased prices, and for the first time in many years, no central bank is hiking the rates. And theirs is a good reason for that.

Many countries around the world are witnessing some tight financial conditions, and people are buying less to cope with the situation. That is one of the main reasons why central banks are now making their products cheaper by taking some practical steps.

Fed's Insurance Rate Cut

It is quite strange that the FED is preparing to go into a monetary easing cycle after many years. However, banks can’t seem to justify the FED’s insurance rate cut policy. This is because the American economy looks in good on the surface, appears to be growing stably, and future forecasts are looking good.

The FED allegedly has plans to cut 25bp twice this year, and without any explanation.

ECB's Potential Response

The ECB is also looking at halting interest rate hikes. As said by the president of ECB Draghi, Europe’s economic condition continues to deteriorate. PMIs are down, and the inflation rate is stuck at 1%.

Brexit has a major role to play in this scenario, and the fear of a no-deal Brexit is taking its toll on even some of the biggest economies Europe like Italy and Germany. Italy’s economy continues to face the fears of a recession going into 2020 when the new budget will be announced. That is why the ECB planning on following the FED’s lead and plans to also cut 20bp from the deposit rate, while moving to a tiered system.

The Slowed Down Chinese Growth

While China is in the middle of a trade war with the US, its economic growth indicators aren’t looking as good as they used to. The economic growth of China is lower than government projections anticipated. That is apparently the main reason why China is now starting to ease its monetary policy.

The sluggish economic growth of China is affecting a major portion of the emerging world as well, as many emerging markets depend on China. The slow growth of the emerging markets is also affecting China because their imports from China have declined considerably.

A No-Deal Brexit

As soon as Boris Jonson took office as the UK's prime minister, he announced that the UK is going to leave the EU by October 31st. While the risk of a no-deal Brexit still remains, experts predict that in order to avoid a general election before the delivery of Brexit, Jonson will have to avoid a no-deal Brexit. This limits Prime Minister Jonson’s options to some extent.

With all the central banks and other economies of the world going into the monetary easing mode, we can expect the market to pick up some pace once again and recover from the current economic downturn.  The value of the Euro may further decrease as a result of the current steps taken by the ECB, but these effects are unlikely to be permanent.

Conclusion

We can conclude that countries are now taking steps to stop any more price hikes due to the pressure on the global economy and that rates will reduce.

The ECB and Europe are both in trouble due to Brexit, and European countries like Italy, France, and Germany have already started suffering from the fallout of it.