After years of liquidity injection at extremely low rates added to the pandemic shock in 2020, which created a worldwide recession with an immediate recovery of monetary and fiscal policies mainly in central countriesThe sequels stayed. Most of the world's economies have suffered high fiscal deficits, a debt mountain, a monetary expansion and a zero rate, and these phenomena have fueled untested inflation in 22 years.
The invasion of Ukraine and more aggressive nationalist policies were a jack to globalization and further dynamized the commodity aft And therefore inflation.
So the central banks began to increase interest rates and withdraw liquidity to try to cooling the economy and thus mitigating the impact of inflation.
The U.S. Federal Reserve (EDF) began to withdraw part of monetary incentives and applied several subas this year at the reference rate that was calculated could continue until mid 2023. Other important central banks follow the trend, but one step back. The era of abundant and infinite money is over and the rates of negative interactions.
The measures to be taken by the EDF, impact In the financial markets and in the real economy:
- The rate suba represents a higher cost for companies and investment projects.
- The sovereign debts in dollars will have the double impact of increased financial burden and increased devaluation against the super dollar, The correspondent goes up on public expenditure and the deficit.
- We provide more expensive mortgage loans, clothing and consumption.
- In the rest of the world, the devaluation of currencies against the dollar gives rise to inflation by increasing the prices of imported products and components, but allows them better export prices of services and manufacturing. You'll have to analyze country by country.
- The economic damage caused by the Russian invasion of Ukraine is summed up: fuel and food prices have given it a particularly harsh blow to the vulnerable populations of the countries of low non-exporting fuel yields and to Europe that crosses a magnified energy crisis, with inflation rates difficult to control.
- In addition, the interruptions in the production chain worldwide after protectionist measures taken by the different governments and the logistical difficulties of China.
Among the G6 countries the largest ratio of total public debt to GDP In June this year, Japan (262%), Italy (151%), the US (126%), France (113%) and Canada (102%). Britain is the lowest ratio with 88%.
In Asia, Japan presented a negative trade balance in the last month, something new, resulting from the prices of raw materials that matter. China has experienced an important economic slowdown in recent years, since it has failed to develop the internal market as expected. The irruption of global pandemic in March 2020 worsened the country's growth problems, which recorded its slowest expansion since 1976, and today devalues your currency to improve your competitiveness and promote their economy through exports.
In summary, Measures to combat inflation will cause a significant slowdown in world growth in 2022. And the central banks will continue to be very attentive to this process, but without ceasing to rise their reference interest rates, prioritizing the fight against inflation. A difficult crossroads to resolve and that markets are in charge of discounting in the prices of financial assets, especially the most volatile.
This column was published in Clarín.
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