Weekly Digest: 7 Rate Hikes, Turkey’s Inflation at New Heights

Newsdesk

5 minutes read

Feb 10, 2022

The Bank of America Tower in glass on Sixth Avenue, New York

10/02/22: Bank of America calls for 7 interest rate hikes this year, Turkey’s inflation hits almost 50%, Germany’s gas reserves at “worrying” levels. And more.

The gold price edged up 0.2% to $1,829.51 an ounce on Wednesday, supported by a weaker U.S. dollar and a retreat in U.S. Treasury yields as investors await U.S. inflation data. (Reuters)

"Rising prices are eroding the value of fiat currencies around the world, making gold an appealing investment for many,” Fawad Razaqzada, an analyst with ThinkMarkets, wrote in a note, adding that gold must now clear the key $1,830-$1,850 resistance range to “make a more serious comeback."

Meanwhile, the silver price dropped 0.1% to $23.16 an ounce, platinum fell 0.4% to $1,027.92, while palladium rose 0.9% to $2,267.50.

Be not proud: Turkey’s inflation hits nearly 50%, its highest level in two decades. Timothy Ash, a senior emerging markets strategist at BlueBay Asset Management, described the situation as the “results of Erdogan’s failed monetary policy experiment.” (CNBC)

Cracked Turkish flag symbolizing the long-standing currency crisis and runaway inflation in the country

The Turkish lira lost 44% of its value in 2021 in a currency crisis, sparked by Erdogan’s refusal to increase interest rates as inflation was consistently climbing up.

Read our SPOTLIGHT to learn more about Turkey’s currency crisis and see what uncomfortably high inflation would feel like in real life.

The currency crisis has hit Turks hard, as the value of their salaries dropped and living costs dramatically increased.

The oil price will “certainly” hit $120 a barrel if Russia invades Ukraine, veteran strategist David Roche has predicted. Oil prices have already seen steady gains since the start of the year when they were trading below $80 a barrel. (CNBC)

black oil barrels with a red arrow pointing up as oil prices are set to skyrocket to $120 a barrel if the Ukraine crisis escalates

“I think if there was an invasion of Ukraine and there were to be sanctions which impeded either Russia’s access to foreign exchange mechanisms, messaging systems and so on, or which prevented them from exporting their commodities, either oil or gas or coal, I think at that point in time you would most certainly see oil prices at $120 [a barrel],” he said.

Russia has denied that it plans to invade neighboring Ukraine but has moved around 130,000 soldiers to the border.

Read our SPOTLIGHT to learn more about the ongoing geopolitical tensions between Russia and the West and what they could mean for the global economy.

Switzerland’s 2nd largest lender CredIt Suisse has had one of the most tumultuous periods in its 166-year history by reporting a CHF2 billion ($2.2 billion) loss for the fourth quarter of 2021. (FT)

The bank’s net revenues dropped 12% in the final quarter compared with a year earlier, while operating expenses jumped 20% in the same period.

Consumers ended 2021 with record levels of debt, which stood at $15.6 trillion, according to data released Tuesday by the Fed’s New York district. (CNBC)

A big chunk of the debt-load increase came from mortgages, which saw balance sheets rise by $890 billion for the year.

U.S. household debt balance as of Q4 2021
U.S. household debt balance as of Q4 2021. Source: New York Fed Consumer Credit Panel/Equifax

The European Central Bank's German policymakers discussed prospects for an interest rate hike, with new Bundesbank chief Joachim Nagel saying that a move could come in 2022, as Eurozone inflation remains uncomfortably high. (Reuters)

"If the [inflation] picture remains unchanged in March, I will be in favor of normalizing monetary policy. The first step is to discontinue the net asset purchases over the course of 2022. Then interest rates could be raised before this year is over,” Nagel said.

Wow, that’s a lot! Bank of America is sticking to its call for seven rate hikes this year as the Fed looks to control runaway inflation. (CNBC)

“If I’m the Fed, I’m getting more nervous that it’s not just a few outliers” that are driving wage increases. If I were the Fed chair ... I would have raised rates early in the fall. When we get this broad-based increase and it starts making its way to wages, you’re behind the curve and you need to start moving,” Ethan Harris, Bank of America’s head of global economics research, said in a media call.

Opinion

a black bear pushing a black bitcoin symbol down the red hill as a symbol of a bearish outlook for the bitcoin price in case of Russia’s invasion of Ukraine

Crypto update: Do you know what’s going to happen to Bitcoin in case of a major geopolitical crisis like Russia’s invasion of Ukraine? Sorry, crypto bulls, the price of bitcoin is unlikely to hit $100,000, an analyst thinks. (Kitco)

“Right now, I don’t see [$100,000 Bitcoin price by year-end] as a possibility, I really don’t. I wish I did. I know there’s a lot of people that are just holding and unfortunately, a lot of people got in at this $60,000 range,” Gareth Soloway, chief market strategist of InTheMoneyStocks.com, said.

What else is happening

A busy street in a big city full of people wearing face masks to protect themselves from raging omicron covid variant

Omicron 2.0. WHO official Maria Van Kerkhove said the omicron subvariant BA.2 is more transmissible than BA.1, the dominant version of omicron worldwide, and will likely become more widespread. (CNBC)

“BA.2 is more transmissible than BA.1 so we expect to see BA.2 increasing in detection around the world,” Van Kerkhove said during a question-and-answer session livestreamed on the WHO’s social media platforms.

Read our SPOTLIGHT to learn how the Omicron variant can affect the global economy and price of gold.

Germany's gas reserves have dropped to "worrying" levels, the government said amid tensions with Russia and a delay over approval of the new Nord Stream 2 pipeline. (Euronews)

A spokeswoman for the ministry for the economy and climate said the government is "monitoring the situation of storage levels and it is certainly worrying."

A resumption of North Korea's nuclear weapon or long-range missile tests would "instantly" trigger a crisis on the peninsula, outgoing South Korean President Moon Jae-in said this week, calling for measures to prevent that from happening. (Reuters)

"If North Korea's series of missile launches goes as far as scrapping a moratorium on long-range missile tests, the Korean Peninsula may instantly fall back into the state of crisis we faced five years ago," Moon said in a written interview.

And finally…

a picture of an enlightened globe surrounded by satellites symbolizing solar radiation

🚀 A solar storm triggered by a large burst of radiation from the sun has disabled at least 40 of the 49 satellites newly launched by SpaceX as part of its Starlink internet communications network, the company said. (Reuters)

"This is unprecedented as far as I know," Harvard-Smithsonian astrophysicist Jonathan McDowell said. He stressed he believed it marked the single greatest loss of satellites from a solar storm.

 

See you next week!

 

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