Central banks move forward, despite omicron

After the Fed, which accelerated the exit from QE, the Bank of England took the markets by surprise for a second consecutive time by raising its key rate from 0.1% to 0.25%. The ECB has been much more cautious and does not plan to hike rates before 2023, but it has also initiated the exit from QE. We will come back in more detail on the decisions taken by central banks this week in a note that will be published during the day. Alongside the independent central banks, the Bank of Turkey lowered its key rate by 100bp to 14%, or 7.3% below the inflation rate which is expected to slip further due to the collapse of the Turkish currency. 

The BoE and the ECB underlined the risks weighing on growth due to the Omicron variant, risks highlighted by the decline in services PMIs in December in the euro zone (53.3 after 55.9) and in the United Kingdom. (53.2 after 58.5).

But they chose to move forward, believing that the worst was not certain. It should be noted, for example, that UK retail sales rose by 1.4% m/m in November + 1.1% in October. December will certainly be more difficult, however.

The bond market remains confident in the ability of central banks to control inflation: long rates are stabilizing at a low level. The slight rise of the euro against the USD (1,132) also seems to indicate that the ECB’s delay in raising its interest rates has already been taken into account in prices.

No US economic indicator today: the IFO survey in Germany and the final inflation figures in the euro zone in November.