Hi everyone,<\/p>\n
This week saw the US raise interest rates by the biggest amount in nearly 30 years. All this of course in an effort to fight soaring inflation and consumer prices….and more hikes are expected. What does this mean for the average man in the street?…higher borrowing costs for mortgages, credit cards, on and any other loan. Most countries have started taking similar measures, including Brazil, Canada, and Australia and even<\/em> the Eurozone plans its first interest rate rise in 11 years later this year.<\/p>\n FED Chair Jerome Powell also made it clear during last Wednesday\u2019s press conference that the central bank\u2019s actions are not intended to tip the economy into a recession.\u00a0 \u201cWe\u2019re not trying to induce a recession now. Let\u2019s be clear about that,\u201d he said…. I now personally believe we could start moving into a stagflation scenario by the end of the year.<\/p>\n Stagflation is characterized by slow economic growth and relatively high unemployment which is at the same time accompanied by rising prices (i.e., inflation), which is then accompanied by declining demand for goods and services.<\/p>\n In history, the most recent example of stagflation comes from the USA in the 1970’s where the onset of stagflation in the 1970s was blamed on the US Federal Reserve’s unsustainable economic policy during the boom years of the late 1950s and 1960s…sound familiar?<\/p>\n What potential steps or actions can we expect to fight stagflation;<\/p>\n -Monetary policy is generally used to try to reduce inflation by using higher interest rates or increasing economic growth. No BIG<\/em> news events this week, but watch out for GBP, CAD & German (Euro) inflation news. The equation is pretty simple, if inflation is not kept under control, or keeps rising,\u00a0 expect interest rates to keep being increased…<\/p>\n ++++++++<\/p>\n Trade for clients & receive a substantial profit share<\/p>\nWhat did Powell say<\/h3>\n
\n\u201cWe\u2019re trying to achieve 2% inflation with a strong labor market \u2014 that\u2019s what we\u2019re trying to do,\u201d<\/p>\nSo, what is stagflation?<\/h2>\n
\n-Reduce an economy’s dependency on oil. Rising oil prices are the major cause of stagflation. (we are starting to see plans around this in Europe already)
\n-Increase the country’s productivity.<\/p>\nThe Forex News Week Ahead<\/strong><\/h3>\n