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Central Banks - Enter The Danger Zone

Next few months uncertainty and volatility are about to rise as most of the global central banks consider the amount of incremental rate hikes. Though the reduction of the rate hikes will be taken as a positive by the markets for the first few weeks as the winter seasonality escalated in November the volatility will be much higher by December.

This will be a danger zone not only from the prospect of inflation becoming more stock but during the same time output growth would start to de accelerate much more quickly as Europe faces energy cuts and demand throughout the world starts to reduce.

Such a scenario would lead to a division in the monetary policy committee that is already appearing in the speeches made individually. Though the Chairman has the veto power to break such divisions the market will not react positively to such a decision as it would lead to a reassessment of rate trajectory according to the markets, which already estimates a cut by late 2023 or early 2024.

All these actions will raise uncertainty in the real and financial world as there would depletion in risk-taking ability. For these reasons, there will be mist matches in the estimates by the market and the real actions along its impact that would dominate the coming 2-3 quarters.


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