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The ECB Aims to Catch the Fed, More Interest Rate Hikes Coming Faster

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18 comments on The ECB Aims to Catch the Fed, More Interest Rate Hikes Coming Faster

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Fed and ECB Target Interest Rates

  • Fed Effective Fed Funds Rate: 4.58 Percent
  • ECB Deposit Facility Rate: 2.50 Percent

Please consider a Twitter Q&A with ECB Executive Board Member Isabel Schnabel

Ask the ECB

Real Interest Rates 

“Persistently higher real rates are required to restore price stability.”

Given that inflation in the Eurozone is 9.2 percent, “real” rates are -6.7 percent.  

Keep Rates High 

In light of inflation at 9.2 percent, it is absurd to call a 2.5 rate, “high”. 

50 Basis Points on the Table

Soft Landing Nonsense

Sorry Isabel, a soft landing is not possible. 

Why is Your Forecasting So Wrong?

The Fed needs to answer that as well.

Central Bank Digital Currency 

Credit Crunch

Net Effect of China 

Why Should Someone Hold the Euro?

Stand With Ukraine

Climate Change Nonsense 

Don’t Blame Us

Despite the fact that our forecasts have been wrong forever and our negative interest policy was downright absurd, don’t blame us. 

Climate Change Now a Part of the ECB’s Mandate

Good luck with that. 

A Question Not Answered

https://twitter.com/andreas_ada_/status/1624050517159575557

There were a lot more questions. I picked a representative sample.

What a hoot. 

Fed Chair Jerome Powell should try this. I am sure there would be some real doozies not answered.

How Many Rate Hikes Does the Market Now Expect of the Fed?

After an allegedly strong January jobs report and a Powell speech, let’s look at rate hike expectations now vs a month ago.

For discussion, please see How Many Rate Hikes Does the Market Now Expect of the Fed?

This post originated at MishTalk.Com

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18 Comments
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PapaDave
PapaDave
3 years ago
Predicting the future is really difficult.
In 2021, Mish could not imagine the Fed raising rates to 2.5% or 3.0% in 2023.
I am not mentioning this to insult Mish. Just to point out that no one knows the future with any degree of accuracy (including the FED and the ECB). So I don’t understand why it is necessary to keep ridiculing their “predictions”.
How Can Anyone Believe the Fed’s Fantasyland Economic Projections?
The Fed’s Dot Plot of interest rate projections is another exercise in silliness.
• MISH, MAR 17, 2021
Dot Plot
The Dot Plot is a summary of where the FOMC members see future interest rates.
It’s unanimous there will be no hikes this year. And by a 14-4 supermajority there will not be hikes in 2022.
In 2023, the expectations are 11-7. Two brave souls actually think the Fed will hike 4 times in 2023. [Note: a reader commented that foolish is a better word than brave. I agree.]
Longer Run Silliness
The longer run is a real hoot. A majority think rates will be 2.5% to 3.0%.
US National Debt is over $28 trillion. Click here to see a continually updated Debt Clock as in every second.
Three Percent Interest On $28 Trillion
Three percent of $28 trillion is $840,000,000,000. That’s $840 billion annually.
Some debt will be long-term financed lower, but $28 trillion isn’t constant.
And what about future recessions?
These projections are nothing more than economic silliness.
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Jack
Jack
3 years ago
Reply to  PapaDave
John Elfreth Watkins made a number of 100 year predictions in 1900. A surprising number of his “outlandish” predictions actually came true.
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PapaDave
PapaDave
3 years ago
Reply to  Jack
A few people who used to comment here accurately predicted the energy transition and how it would restrict oil and gas supplies for the rest of this decade. Listening to their predictions has made me a lot of money.
Did you make any money from Watkins predictions perhaps?
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8dots
8dots
3 years ago
US yield curve is almost linear in a low slog down. For years Gravity with Germany pulled the middle down. The middle dragged the long duration with it. With less gravity between US & the ECB US middle is flattening. For years gravity with US pulled the German long duration up. The German yield curve is almost flat and horizontal. Det10Y – Schatz = (-)0.4%. If Germany is in recession the German yield curve doesn’t show it. Europe economy is worse than ours. // After the Fed and the ECB hike, the middle and the long duration are catching up. If the Fed stop at 5.5% the long duration will osc below and above.
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8dots
8dots
3 years ago
We are slowing down. In June the CPI might be minus 4%/5% y/y. China opened. WTI and gold slumped
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8dots
8dots
3 years ago
The ECB is up 3% from minus 0.5% to 2.5%. They will cont to raise rates in unison, with less friction. The BOJ might do the same.
With zero gravity between them, they can fly anywhere. The Dow observe the Fed. The DOD observe Putin & Shi.
On Feb 24 our “Space Fence” will focus on Ukraine. After we lost Bagham, we are shooting them. EMP balloon might explode above
Ukraine.
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Casual_Observer2020
Casual_Observer2020
3 years ago
We are entering extremely dangerous territory for the economy imo but it’s overdue and necessary. Western Governments are caught between a rock and a hard place.
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Doug78
Doug78
3 years ago
“Why Should Someone Hold the Euro?”
Look at the Dollar/Euro exchange rate since the Euro’s inception.
The Euro is not stable against the dollar or alternatively the Dollar is not stable against the Euro. The trading range is wide and considering what Europe had to go though this last year it is now reaching back up to its 2014-2021 trading range. The first Russian invasion of Ukraine in 2014 knocked it out of the former higher trading range. The second invasion caused a good dip which is now in recovery phase. If you day trade then it doesn’t matter. If you are an investor like me then I am a buyer at these levels. There are a lot of problems and some will get worse but the means of their resolution are now being put in place both economically and politically.
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caradoc-again
caradoc-again
3 years ago
Anyone sure those answers are not from ChatGPT ?
Reads eerily like an AI bot.
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Maximus_Minimus
Maximus_Minimus
3 years ago
The main risk is not they they spew BS, but that they actually believe in their BS.
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nightrite
nightrite
3 years ago
Time to invest in coffins.
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Ultracrepidarian
Ultracrepidarian
3 years ago
This is why the US markets are pricing everything incorrectly. Because Powell is going to need to continue raising rates, not in response to the current inflation in the US, but in response to the interest rate hikes in Japan and Europe, because if the US dollar falls then the trade deficit brings more inflation from import prices.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  Ultracrepidarian
Well inflation is also going back up the last month as well. Gas prices are back up 25% where I live.
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Matt3
Matt3
3 years ago
With digital currency, they can eliminate cash and then utilize negative interest rates. That way inflation can run significantly higher than rates (maintain real negative rates). It’s the only way to handle the massive debts of western countries. They must devalue the debt. It can’t be repaid.
ECB and the Fed are only interested in supporting governments.
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Jack
Jack
3 years ago
Reply to  Matt3
They are telling you to buy more junk you do not need from China, or buy inflated assets. Sell your cash.
In the end nobody will have cash, money in will be money out.
Nobody will be able to buy expensive assets – you will buy everything with subscriptions or pay as you go: housing, vehicles, software, phones, etc…
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Captain Ahab
Captain Ahab
3 years ago
“… Given that inflation in the Eurozone is 9.2 percent, “real” rates are -6.7 percent…”
The only question is where to hide when SHTF. Perhaps that should be a blog topic?
Long self-storage centers.
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Six000mileyear
Six000mileyear
3 years ago
Reply to  Captain Ahab
Gasoline, heating oil, rice, canned goods. Table saw blades, drill bits, nails, lumber.
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Maximus_Minimus
Maximus_Minimus
3 years ago
Reply to  Captain Ahab
Carbon credit prices must be up more than that.
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