During the first quarter of 2022, the Fed continued with 0% rates and expanded its balance sheet through what we know as unconventional monetary policy, or “QE,” despite the fact that inflation was already at 8.5%. % Was. In the case of the ECB, stimulus measures were extended until July 2022, and with inflation above 8.5%, interest rates were maintained at negative levels and they continued to buy debt, thus expanding the central bank’s balance sheet. . Historical maximum level.
But once the problem became too big to hide, the central banks’ strategy took a 180-degree turn.
And for the last few quarters there has been a declaration to “fight inflation at all costs”, a dangerous statement, especially when the mainstay of growth for the last two decades has been chronic indebtedness, something that was not possible. Without the constant stimulus of the increasingly cheap cost of funding due to the excessively expansionary policies of the same central banks.
In a world where global debt represents more than 350% of GDP, the speed with which money is being spent could have dire consequences.
Since generalization is usually a very common mistake, and especially when we talk about future economic projections, we take a closer look at the current reality and across different geographies and assets to better understand possible scenarios for 2023. Going to bust the guesses. Before we begin, we must understand that the kind of inflation we faced during 2022 was a direct result of the hyper-expansionary monetary and fiscal policies implemented during 2020 and 2021 to fight the economic slowdown. The result was, the projections that we are going to propose for this year are the result of anti-inflationary measures taken by central banks throughout 2022.
