Central banks' focus on fighting persistently high inflation could lead to a recession over the next two years and raise the risk of 'financial accidents', U.S. investment firm PIMCO said on Wednesday.

Rising prices have dominated the global financial markets this year, pushing central banks to increase interest rates to contain demand. But uncertainty around the pace of tighter monetary policies and its consequences for global economies have led to high volatility in markets.

Geopolitical instability caused by the war in Ukraine has also contributed to wild price swings across bonds and stocks, while exacerbating inflation by pushing the costs of commodities such as oil and gas. (Reuters - Continue Reading)

The European Central Bank will raise its deposit rate above zero for the first time in a decade in September, according to most economists polled by Reuters, who expect it to be at least 50 basis points higher than previously anticipated by year-end.

While economists say euro zone inflation is yet to peak the ECB has given itself some room to catch up with its global peers, who are rapidly hiking rates to neutral, by planning a new instrument to limit the divergence in the bloc's bond yields.

The June 15-22 poll showed all but two of the 55 economists expected the ECB to deliver a quarter-point raise on July 21 to -0.25%. Two expected it to hike by 50 basis points, compared to none in the last poll. (Reuters - Continue Reading)

Westpac Banking Corp. Chief Economist Bill Evans expects the Reserve Bank of Australia will raise borrowing costs by 50 basis points at its next two meetings and reach a terminal rate of 2.6% in February.

Evans revised up his August forecast to a half-point hike from a previous 25-basis point move to reflect “what is expected to be a very unsettling June quarter inflation report,” a research note showed Thursday. That in turn lifts his terminal rate and brings it broadly in line with the RBA’s 2.5% guidance.

“Australia’s soft landing will allow the RBA to hold rates steady in 2023 and 2024 as inflation gradually eases back,” he said “We accept that our forecasts for the cash rate assume a successful navigation of a very narrow path towards a soft landing.” (Bloomberg - Continue Reading)

The dislocation of global fuel markets after Russia’s invasion of Ukraine has boosted the cost of shipping products such as diesel by sea.

Rates to haul fuels such as gasoline and diesel, known in the industry as clean tanker freight, have more than doubled this year to the highest since April 2020, according to Baltic Exchange data.

On one key route in Asia, ship owners are now earning over $49,000 a day transporting products from South Korea to the distribution hub of Singapore, compared with $98 a day prior to the war. (Bloomberg - Continue Reading)