Powell's new moves to limit inflationary pressures through further rate hikes were supported by the Bank of England, Swiss National Bank, and Norges Bank.
The consequence of tightening monetary policy will be a restraint on economic growth in the world's leading economies.
This week's UK report showing persistent price increases and Federal Reserve Chair Jerome Powell's warning of two more borrowing cost hikes are a sign of a new policy tightening cycle.
The Bank of England's decision to raise rates by 50 basis points was unexpected, but it cannot be said that it was not justified by recent data. The obvious question is whether this hike will be the first of many or not?
For this, core inflation as well as service inflation have to continue rising.
As for the situation in the U.S., Powell said that the process of bringing inflation down to 2% takes time.
Meanwhile, the European Central Bank last Thursday also projected another rate hike in addition to the one it just made.
In Switzerland, core inflation is now below the 2% target. Even so, the central bank has tightened policy by 0.25% and warned that this hike is not the last.
The scenario with global central banks starting a new tightening cycle will cause increased volatility in the currency markets.
In this case, the recommendation would be to reduce the risks and to strictly control the amount of open positions!
For visual support, the Bollinger Band indicator can be used, on which it is worth increasing the deviation value from the standard 2 to 4 units.
These limits will give guidance on the expected volatility spread.
This content is for informational purposes only and is not intended to be investing advice.
