Financial conditions reflect whether monetary policy acts as a support to growth or as a headwind. They can be assessed by looking at the level of short and long-term interest rates, corporate bond spreads, the exchange rate. Sometimes equity markets and bank lending survey data are also taken into account.
GDP growth should decrease markedly in France during 22H1, as a result of supply-side constraints (weighing mainly on the car and construction sectors). Purchasing power losses add to these constraints and should have their wider impact on sectors affected by the strongest price increases, such as energy and food. Growth should recover from Q3, as income growth should accelerate and improve household’s purchasing power.
As a result of the war in Ukraine, the energy shock experienced in Europe is questioning the economic recovery. It also highlights the urgent need for a transition to carbon neutrality.
The Covid-19 pandemic has confronted us with the fragility of long, complex global value chains and the war in Ukraine shows that geopolitics can be a major cause of supply disruption.
The macroeconomic and financial environment is not favourable to Indian economy. India faces two new economic headwinds: the US monetary tightening and the sharp rise in international commodity prices.
The Brazilian real has strongly appreciated since the beginning of the year boosted by the rise in commodity prices, the rebalancing of investment portfolios and increased real interest rate differentials with other emerging economies as well as developed markets. If the rise of the currency is helping to tame down inflation, its effects should nonetheless not be overstated.
The net impact of the war in Ukraine on the euro area banking system should be relatively subdued, due to very low direct exposures to Russia and Ukraine, and should mainly pass through macroeconomic effects.
The sharp rise in soft commodity prices entails a deepening of the current-account deficit. It should accelerate the deterioration in foreign currency liquidity. In this context, a renewed international financial support could be needed.
The March 2022 projections of the ECB include an upward revision by almost 2 points of its inflation forecast for 2022 (5.1%) and a downward revision by half a point of its growth forecast for 2022 (3.7%). Inflation would then fall back towards the 2% target and growth is expected to remain strong. In terms of monetary policy decisions, the ECB announced in particular a faster APP tapering and its possible conclusion in Q3 if inflation does not weaken as expected.
The war in Ukraine is impacting the global economy in various ways: higher commodity prices, international trade, financial markets as well as an increase in geopolitical uncertainty, which is a key channel of transmission. It influences decisions by households and companies because the full effect of the jump in oil and gas prices is not yet visible and because of concern about further increases in commodity prices.
With the rise in sovereign interest rates in Europe, concerns about public debt in Italy are resurging. Can we make a connection with the situation in Italy in 2010/2011, during the sovereign debt crisis that shook the euro zone?
Gabriel Boric, candidate of a vast left-wing coalition, won the second round of the Chilean presidential elections, last December. He will take office in March and his government will have a full agenda. Regarding economy, growth has slowed down since 2015.
France has registered a record trade deficit in 2021, about EUR 85 bn. Oil prices were the main trigger of the deterioration compared to 2020. However, in the medium run, the main structural evolution is the deepening of the deficit on industrial goods: by about EUR 25bn during the last 10 years to 50bn in 2021. In 2022, the trade deficit should reach EUR 100 bn: a sizeable burden on French’s purchasing power.
Over the past two years, the world economy has suddenly moved from too little to too much inflation.
The Turkish monetary & exchange rate policy in times of financial instability: economic rationale and consequences.
In early 2022, the economic picture in the euro zone is still dominated by concerns about the extent of the negative effects of the latest wave of the pandemic, the continuing surge in inflation and supply-side tensions. However, there are also glimmers of hope on all three fronts.
Looking at 2022, the US Federal Reserve warns it could raise rates and reduce asset purchases sooner and faster than expected.
