The global economy is showing remarkable resilience despite the numerous challenges posed by the coronavirus pandemic, and this has led economists to believe that central banks still have a lot of work to do. According to a recent report from Nordea, the risks remain tilted toward this hiking cycle continuing for considerably longer.
The report suggests that the Federal Reserve will need to bring the Fed funds rate up close to 6%, while the European Central Bank’s benchmark rate could reach 4% by the end of the year. The report also predicts that longer US yields will continue to climb, with the 10-year Treasury yield targeting 4.5%.
These predictions appear to be based on the strength of the global economy, which has been able to withstand the shock of the pandemic and continue to grow. This has been a major factor in the decision of central banks to continue to raise interest rates, as they attempt to bring inflation under control and prevent the economy from overheating.
The global economy has been able to absorb the shock of the pandemic due to the swift action taken by governments and central banks. Governments have provided financial support to businesses and individuals, while central banks have cut interest rates and implemented quantitative easing measures. This has helped to boost economic activity and provide much-needed support to the global economy.
At the same time, the global economy has benefited from the increased demand for goods and services as consumers have returned to spending. This has helped to offset some of the losses caused by the pandemic and has provided a boost to economic activity.
However, it is important to note that the global economy is still fragile and vulnerable to shocks. The pandemic has had a significant impact on economic activity, and the recovery is still fragile. As such, central banks will need to ensure that they are taking the necessary steps to maintain economic stability.
This means that they will need to continue to raise interest rates in order to keep inflation under control. This will help to ensure that the global economy remains on a sustainable path of growth. At the same time, central banks will need to ensure that they do not raise rates too quickly, as this could lead to an economic slowdown.
Overall, the report from Nordea suggests that the global economy is on the path to recovery, but there is still a lot of work to be done. Central banks will need to continue to raise interest rates in order to maintain economic stability and prevent inflation from becoming a problem. At the same time, they will need to ensure that they do not raise rates too quickly, as this could lead to an economic slowdown. As such, it appears that the risks remain tilted toward this hiking cycle continuing for considerably longer.