Last week the markets were walloped by two massive interest rate increases.
First up was the Federal Reserve which raised interest rates by an expected 0,75 percent, initially the markets rallied and that’s because of a statement the FED released.
When it announced the rate hike basically the statement contained an extra sentence that suggested the FED would soon start lowering interest rates.
By now you’ll know that lowering interest rates means it will become easier for investors and institutions to borrow and this means that asset prices and economic output will increase.
Unfortunately for the speculators FED chairman Jerome Powell made it clear during his subsequent press conference speech that the FED would not be lowering interest rates anytime soon.
Jerome went one step further by saying that the terminal rate the highest level that the FED will be raising interest rates to had risen significantly because of CPI data.
Naturally the markets immediately collapsed in response including cryptocurrency, however both the stock market and the crypto Market rallied later in the week.
Now this is paradoxically because of the increase in unemployment from 3,5 percent to 3,7 investors were expecting it to stay steady at 3,5 percent.
I say paradoxically because higher unemployment means there is a higher likelihood that the FED will be forced to stop raising interest rates sooner than it is currently planning.
Put differently if people start losing their jobs then the markets start to Rally that is the Twisted Financial system we’re in.
It’s still not nearly as bad as what’s going on in the UK, however the bank of England also raised interest rates by 0,75 last week, the highest in over 30 years.
This is a problem because many Brits have adjustable rate mortgages meaning many of them could be at risk of losing their homes.
A lots of homeowners in Canada and Australia also have adjustable rate mortgages, any Force selling could cause the massive housing bubbles in both countries to pop and some would say it’s inevitable.
That’s because most central banks seem intent on raising interest rates to crush inflation and they don’t really have any other choice.
Failing to keep Pace with the FED means their currencies will continue to lose their value and inflation could rise even higher into the double digits as a result.
What everyone is wondering now is how high the FED will go whether other central banks will be able to keep up and what effects this will have on the global economy.