A grim forecast for the future of interest rates | CNN Business

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When will central banks stop raising interest rates? That’s the multi-million dollar question that has Wall Street analysts wearing wristbands for shaking their Magic 8 Balls so hard.

Unfortunately, the response they get is “confused answer, please try again”.

What’s going on: Last week, European Central Bank officials announced another massive hike of three-quarters of a percentage point, raising interest rates at the fastest pace in the euro’s history. This week, the Federal Reserve is expected to raise rates by 75 basis points for the fourth time in a row. The Bank of England could join the club on Thursday.

For some time, 2023 was thought to bring lower interest rates and a return to dovish monetary policy. But a mountain of mixed data is clouding that outlook. Now some analysts think that central banks will take a less rapid approach to policy decisions, opting instead for smaller, sustained hikes over a longer period.

Around the world, central bankers have raised lending rates overnight in the hope that they can cool the economy and temper runaway inflation by making it more expensive to borrow money. So far, the impact has been mediocre.

The annual rate of inflation in the eurozone reached a record 9.9% in September, compared to 9.1% in August. A flash estimate for October released on Monday showed inflation accelerating to 10.7%.

The “unexpected and extraordinary” rise in inflation surprised policymakers, ECB President Christine Lagarde told reporters on Thursday. She said that increases in retail energy prices could push inflation further in the medium term.

Meanwhile, the US economy grew by 2.6% last quarter, indicating that the economy is not yet weakening (although there are signs that a slowdown could be in the offing). New personal consumption expenditures data on Friday, the Federal Reserve’s preferred measure of inflation, showed the United States still grappling with elevated prices. Europe also continues to grow.

Will they or won’t they? Even the Federal Reserve seems confused about when stop rate hikes.

that ambiguity was perfectly summed up in a speech by Federal Reserve Bank of Cleveland President Loretta Mester earlier this month:

“It is unlikely that we have seen the full effects on households and businesses of the latest rate increases we have implemented, and it would not be appropriate to continue raising rates until inflation drops back to 2 percent.” She said: “But it is also true that based on Fed communications, financial conditions started to tighten well before our first rate hike in March and those effects have trickled down to the economy. However, high inflation persists, an indication that we need to raise rates further.”

Due to a data lag, central bankers aren’t sure if they’ve done enough. If they ease rate hikes too soon, they risk further entrenching inflation in the global economy. If they overcorrect, they risk plunging their countries into recession.

One possible answer: Wall Street tends to favor big events, but the future of central bank policy may be more nuanced. To kill TS Elliot: Hardening will end not with a bang, but with a groan.

“We think the market is overconfident that 2023 will feature an early Fed pause and a large rate hike in Europe and beyond,” Goldman Sachs analysts wrote in a recent note. “If the economy stays out of recession in the coming months, which we think is likely, this would increase the risk of a more gradual but extended Fed cycle through 2023.”

Going up: The Federal Reserve will meet on Tuesday and Wednesday to determine its next policy move. Fed Chairman Jerome Powell will address reporters directly after the decision is announced at 2 pm ET on Wednesday. The Bank of England announces its rate decision at 8 am ET on Thursday.

After spending months trying to get out of his deal to buy Twitter (TWTR), Elon Musk officially owns the hugely influential platform, reports my colleague Clare Duffy.

Now the question is: What will he actually do with it?

A big change for content moderation: Under Musk’s ownership, Twitter could reverse steps it has taken to make the platform more acceptable to its most vulnerable users, typically women, members of the LGBTQ community and people of color, according to security experts.

Musk has said that Twitter, under his leadership, would have more lenient content moderation policies. “When in doubt, let the speech exist,” Musk said in an onstage interview in April. “If it’s a gray area, I’d say let the tweet exist. But obviously, if there’s a lot of controversy, you don’t necessarily want to promote that tweet.

Unban accounts: The most surprising early change could come from who is and who is not allowed on a Musk-owned Twitter.

Musk has said he thinks Twitter should be more “reluctant about taking things down” and “very cautious about permanent bans.” That could mean a long list of controversial far-right figures and conspiracy theorists, among others, will soon find their way back onto the platform.

Musk, for his part, has focused on bringing back one of Twitter’s most prominent former users: Trump.

An owner with an erratic and controversial track record on the platform: Musk has a mixed reputation in the tech industry. Without a doubt, he is one of the most ambitious and successful innovators and entrepreneurs of this era. But he has also garnered controversy, often from his own Twitter profile, where he has more than 100 million followers.

Over the years, he has tweeted misleading claims about Covid-19 and made an unfounded accusation that a man who helped rescue boys from a cave in Thailand was a sexual predator. He has also tweeted a (since-deleted) photo comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler and compared now-ousted Twitter CEO Parag Agrawal to Joseph Stalin.

On Sunday, he gave credence to a conspiracy theory about the attack on Paul Pelosi by tweeting a link to an article filled with unsubstantiated claims. He later deleted the tweet, but not before racking up 28,000 retweets and 100,000 likes.

The relationship between the United States and Saudi Arabia is one of the most important on the planet. And lately, it’s also been one of the most awkward, reports my colleague Matt Egan.

Angry officials in Washington promised “consequences” after Saudi-led OPEC slashed oil production earlier this month, sending pump prices soaring just weeks before midterm elections. .

US lawmakers are threatening to take steps that were unthinkable not long ago, including banning arms sales to Saudi Arabia and unleashing the Justice Department to sue the country and other OPEC members for collusion.

Saudi officials are hinting at a repayment, including dumping of US debt, which could have a huge ripple effect on financial markets and the real economy.

What happens next is critical.

If this decades-long relationship turns into a complete breakdown, there could be huge consequences for the world economy, not to mention international security.

“This is a new low. We have seen a degradation in the relationship between the United States and Saudi Arabia for years, but this is the worst there has ever been,” said Clayton Allen, director of Eurasia Group.

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