Monetary policy options in an environment of uncertainty… Inflationary pressures have pushed central banks into a corner. As inflationary pressures and the crisis in Ukraine continue to worsen, central banks are left with little choice. Developments on a global scale push central banks to tighten their monetary policies even more.

Fed futures funds rate projection pricing… Source: Bloomberg, CME Fedwatch

Tighter policy in response to increasing inflation... If we look at what the Central banks other than the Fed, which we constantly evaluate, are doing, we see that the tightening tendencies are valid, albeit with different coefficients. The Bank of Canada increased interest rates by 50 basis points, and the European Central Bank reaffirmed its expectation of stopping asset purchases by the end of 3Q22. However, banks that have tightened the policy lately or stated that the tight policy is on the way are not limited to these two.

Over the past two weeks, major central banks have increased interest rates: Chile (+150 bps), Colombia (+100 bps), Peru (+50 bps), Israel (+25 bps) and New Zealand (+50 bps).

While this whole concept suggests that tightening is spreading around the world, monetary tightening in the US has outstripped and will continue to outpace most major foreign economies.

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