Hawks in charge of Central Bank-a-Palooza (BOE, CBRT, Norges)
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The current economic situation in Europe is quite concerning. Despite consistent and strict decisions made by the central bank, it is now apparent that any further attempts to tighten economic policies will only lead to the downfall of the entire European economy.
In an effort to combat inflation, the BOE may inadvertently cause damage to the UK economy. However, the British pound saw a rise in value after the BOE announced a half-point rate increase and hinted at the possibility of more hikes in the future. The decision was supported by seven members, with only two preferring to keep rates unchanged at 4.50%. Notably, the Norges Bank also recently implemented a large rate hike, so the BOE is in good company.
Europe is experiencing a lack of inflation, despite the fact that it should have been present by now due to tightening cycles. The inflation reports are causing concern for the growth prospects of Europe, as the outlook does not appear to be improving.
It's uncertain what will happen to the British pound. Some traders believe there may be a recession that isn't needed, but others think trying to control inflation is a good idea. Gilt yields are gradually getting lower according to the long-term outlook.
The Turkish currency, lira, fell down due to the CBRT increasing rates by only 650 points, while also indicating that the process of tightening the monetary policy would be gradual yet timely. Hafize Erkan, the new central bank governor, initiated the tightening process with the goal to keep inflation under control and prevent worsening price behavior. This change from the unconventional monetary policy is a positive development that is expected to help maintain stable prices in the future.
The value of the lira is dropping rapidly because the CBRT couldn't match the expectations of the stock market. The fresh economic team has initiated this procedure of restriction and eventually this traditional mode of monetary policy ought to bolster the value of the lira. As a result of the ruling, the lira attained its lowest ever value against the dollar.
The Norges bank, which is Norway's central bank, shocked the financial world by hiking interest rates more than anticipated. This marks their 11th consecutive interest rate hike. The key deposit rate was raised by 50 basic points (bps) to 3.75%, with indications of even more extreme tightening measures forthcoming. The Norges bank felt compelled to take action due to persistent inflation and the vulnerable state of the krone, which was the weakest currency in comparison to the G-10 group.
Today, the Norwegian krone had a significant increase against all of its main trading partners, which was influenced by their decision to implement strict measures in order to strengthen their economy.
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Ed Moya is an experienced senior market analyst at OANDA, with over two decades of trading experience. He provides up-to-date intermarket analysis, coverage of geopolitical events, central bank policies, and market response to corporate news. His extensive knowledge covers various asset classes, including FX, commodities, fixed income, stocks, and cryptocurrencies. Ed has previously worked with other forex brokerages and research teams on Wall Street, such as Global Forex Trading, FX Solutions, and Trading Advantage. He also worked as a market analyst with TradeTheNews.com, where he analyzed economic data and corporate news. Based in New York, Ed is a regular guest on several financial networks such as CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, and Sky TV. His opinions are respected by global newswires like Reuters, Bloomberg, and the Associated Press, and he is often quoted in reputable publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times, and The Wall Street Journal. Ed graduated from Rutgers University with a BA in Economics.
