Those of you that follow me know that I like to keep track of central bank interest rates. I can tell you that I see no slowing down in their posture. The last year and a half has been chock full of record pace increases by central banks around the world, with the FED and the Bank of Canada leading the charge which in turn has forced all the other central banks to act accordingly. There's even word that will soon finally end their crazy negative rate policy.
Now, word is flowing out that the ECB has hiked again and for the tenth consecutive time, adding points to all their lending rates, bringing the key deposit rate to 4%, breaking the previous high set in 2001. Consensus was there would be no rate hike so this is seen as a 'surprise' to the markets. They claim 'inflation continues to decline but is still expected to remain elevated for too long
On the other hand, a report by Trends Journal publisher Gerald Celente that was published on KingWorldNews yesterday titled, 'Look at how bad the situation in Europe has become', suggests Europe is in big trouble. He states the Euro has lost more than 5% against the USD since July over worries the Eurozone is headed for recession, adding that Germany's economy, the fourth largest in the world is on trend for contracting in the final quarter of 2023.
The ECB's fresh rate hike is obviously a push to strengthen the Euro against the Dollar which as Celente remarks 'Will stay king until the FED starts lowering interest rates again'. Yet, they are doing this at a time when it's clear that a contraction is occurring that could end up being dragflationary, a period of declining economic growth and rising inflation.
Coupled with declining oil production thanks to OPEC that has already pushed oil prices higher through the summer, the ECB's imaginary 2% inflation target will not be met as a result. In my previous article titled, 'Projected oil deficit next quarter signals higher gas prices', I warned that by the end of this year, OPEC will have cut almost half a billion barrels of oil production. First, they cut by a million barrels per day through April, May and June, then increased the cut to 2 million barrels per day for July August and September and increased the cut by another million for a total of 3 million barrels per day removed from production for the final quarter of 2023. This amounts to just under half a billion barrels and clearly signals much higher gasoline prices are on the way and in turn, ramp up inflation even higher.
Just to throw gas into the fire (pardon the pun), OPEC has not cut production back so drastically since 2007. What followed??? The Great Financial Crisis and eventually, $145 per barrel oil... Are we about to see a repeat? What if oil goes higher to $200. Such a scenario is troubling, to say the least!
The consensus is that central bankers will be forced to lower rates soon. Not with higher inflation on the way. Because of higher oil prices, I see more rate hikes on the horizon. Just last week, the Bank of Canada held rates steady at 5%, which is a 21 year high but stated they will increase if necessary. With higher gas prices on the way, I expect that rate to be at least 6% by year end.
Remember not long ago when the FED's Jerome Powell stated that 'inflation was transitory'? Don't you believe it! I'm anxious to see what they do after their next FOMC meeting. Their last rate hike (25 basis points) was in July to 5.25% / 5.5%, a 21 year high for U.S. interest rates. Their next meeting ends at 2 p.m. on Wednesday, next week.
What do you expect from the FED next week? Do you see a pause or another rate hike? Please leave a comment below and share your thoughts, thanks. See links in the references section for more information.
Peace and love to everyone!
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Previous Posts:
Massive oil deficit next quarter signal higher gas prices!
Loose lips sink ships. Your co-workers are not your friends.
Central bank gold buying spree not slowing down.
Canada holds rates steady at 5%.
Oil prices in gold remarkably stable for last 70+ years.
USA DEBT: $32 Trillion and counting...
San Francisco - Echoes of old Detroit
M2 money contraction + rate hike double lag effect
Silver's massive 237 million ounce deficit
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