US recession
The US may be able to avoid a recession despite an interest rate hike by the Federal Reserve. Agustin Carstens, general manager of Bank for International Settlements (BIS), expressed this view.
"The latest US labour market and business data were better than expected and pleasantly surprising. A few months ago I was more concerned about the impact of high interest rates," he said.
"It's too early to declare victory, but so far things are going well. There is a real chance that a recession can be avoided. It is quite likely," Agustin noted.
However, not all financiers share this optimism. A Natixis Investment Managers poll carried out recently showed that six out of ten investors think a recession in the US is inevitable. Collectively, the survey participants manage $20.1 trillion in assets.
Agustin Carstens said global central banks, including in the US, have had to raise their rates to curb inflation at an early stage, even though individual countries are in recession.
"We are facing some period of relatively high interest rates. If we allow inflation to take root, it will then be much more difficult to bring it down, and that may require much tighter monetary policy," he summarised.
It's worth noting that US consumer prices rose 7.7 per cent in October from a year earlier, up from 8.2 per cent in September, 8.3 per cent in August and 8.5 per cent in July. Prices rose 9.1 per cent in June, the highest since November 1981.
Carstens said the US and other global central banks had to raise their rates to cushion early inflation, although some countries are experiencing an economic slowdown. US interest rates are likely to peak soon, but are unlikely to fall again any time soon.
Hong Kong lenders are expected to raise their key rates by another 25 basis points if the Fed and HKMA raise base rates on Thursday, the managing director of T.O. and Associates Consultancy said. This would be the third time commercial banks have raised their key lending rate in the past three months, following increases of 25 basis points in November and 12.5 basis points in September.
