The European Central Bank hiked rates to 2.5 percent while dealing with inflation, a U.S.-Iran war, and rising borrowing costs. One of those things appears in no other headline from this timeline. The other two are the same sh*t central banks always complain about.
Policymakers see risk of higher inflation and weaker growth. They see risk of both directions at once. Up and down. Expensive and broke. It's like betting red and black on the same spin and calling yourself a strategist.
The U.S.-Iran war gets mentioned once in the summary then vanishes like a fart in the wind. No details. No casualties. No oil shock specifics. Just "consequences." The consequence being some intern had to type seven extra words into a Reuters terminal before lunch.
Retail traders read "rising borrowing costs" and immediately opened leveraged positions in European bank stocks because they heard the word "rates" and remembered a podcast once. They did not read the part about weaker growth. They never read that part.
The ECB raised rates because prices went up. Prices went up because energy costs rose. Energy costs rose because of a war that gets mentioned in one headline and ignored in every analysis that followed. This is how you get paid to do monetary policy. You acknowledge a war exists then adjust rates by a quarter point like you're seasoning a soup.
Government borrowing costs are surging, which means the same governments that spent a decade begging for stimulus now have to pay interest on the debt they said would never matter. Turns out it mattered.
Christine Lagarde raised rates while a war raged and growth collapsed, then probably went to lunch, because there's nothing left to do when you've already tried nothing and you're all out of ideas.
Photo by on Unsplash
Leave a Comment