Rocket Fuel – 12.18.2021

When it comes to monetary policy (interest rates), policymakers and their views are characterized by types of birds.  

Those who believe inflation is running too hot and want stimulus removed from the economy are called inflation hawks. 🦅 (The eagle emoji will have to do – just like this week’s Fed announcement – relatively hawkish.) 

Those who believe growth is lackluster and want stimulus in the economy are called doves. 🕊️ 

Lots of times, the discussion is around which of the Fed voting members are in which camp (or nest).  
Since we’re dealing with a global pandemic with virus variants springing up around the world, let’s look more broadly at birds. 🌎 

  • Bank of England – Hawkish 🦅 
    Bank of England hiked interest rates by 15 basis points on Thursday – the first G7 nation to raise interest rates since the pandemic started. 
  • U.S. Federal Reserve – Hawkish 🦅 
    The Fed speeds up the wind-down of bond purchases (stimulus) and moves up the timeline for rate hikes. 
  • Bank of Japan – Dovish 🕊️ 
    Japanese producer inflation is like the U.S. at 9%, but consumer inflation is at roughly 0% after the island nation has battled 20+ years of no inflation. The central bank is in no hurry to remove the punch bowl. 
  • European Central Bank – Dovish 🕊️ 
    Like Japan, Europe has struggled with low inflation over the last decade, and with more lockdowns than we have here in America, they won’t be ripping off the bandage as quickly.  

    And then there’s Turkey … 🦃 

    With inflation up to 21.7%, the country has CUT interest rates each of the last 4 months.  

    “It’s a bold strategy, Cotton. Let’s see if it pays off for ‘em.”  

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