The priority in 2022 is to avoid a failure of monetary policy
The central bank supports most of the economic protagonists of next year, during which growth and inflation will mark the delicate process of withdrawing some historical stimuli. The elections in France and the midterm elections in the United States are the main political events.
On January 26, the Federal Reserve (Fed) holds its first meeting on monetary policy in 2022. It will still be too early for the institution to feel the urgency of carrying out the first key rate hike of this cycle. should not even anticipate expectations (three this year). Yes, you will have more information on the current peak of inflation, the evolution of the cost of energy and the problem of bottlenecks in world trade, the three main uncertainties concerning the economic recovery of the last few years. month of 2021.
Any setback by the Fed will be fatal for the market, supported in large part since April 2020 by the historic and extraordinary injection of liquidity designed in response to the Covid pandemic by the body chaired by Jerome Powell, and in parallel by the rest from the power station. banks. But it will not take a failure for there to be fears, any misleading message will raise the tension.
“Investors must be proactive and prepare for volatility in 2022,” acknowledges the analyst team of Allianz Global Investors in their outlook report for 2022. On February 3, the European Central Bank (ECB) opens its doors . Although it’s March 10, the 16 of that same month in the case of the Fed, the big announcements could come.
To begin with, that same month, the emergency Eurozone debt purchase program ends, and this will depend on the progress of the economic recovery, acceleration or deceleration of the pre-pandemic program with which the institution has left room for maneuver to respond flexibly to future contingencies. .
“An accommodating and protective ECB, associated with continued budget support from governments, could maintain favorable credit conditions, perpetuating the cycle and assets,” summarizes Andbank’s team of experts in its projections. “The agency justifies its position by its conviction that inflation could have reached a peak,” he continues.
Regarding the Fed, “it is on the way to normalization, but keeping the cost of capital below the return on capital,” they remind Andbank. “The current levels of inflation would be seen by the institution as a window of opportunity to regain gunpowder and room for maneuver in the face of future crises,” they summarize.
Los ‘Next Generation’
Shortly before Christmas Eve, the European Commission (EC) authorized the payment of 10 billion to Spain from the Next Generation reconstruction funds. In the summer 9,000 more arrived. For August 2022, the pre-financing of the second tranche is planned, a total of 18,000 million euros more towards the end of the year.
This European Union (EU) stimulus fund is taking center stage with the gradual withdrawal of the ECB from the market. “Investment will become the engine of growth in 2022, where we expect the greatest impact from European funds,” says Bankinter’s team of analysts.
Along with the implementation of these plans, the political and geopolitical dimension will be crucial for the EU, with the entry into the Bundestag of the new German government, the elections in France, Portugal or Hungary, the pulse of the latter country and Poland with the rest of the community club, the tensions with Russia and its impact on energy, the trade tensions with China and the divorce with the United Kingdom and all its consequences.
The presidential elections in France deserve special mention, with the memory of the volatility that this same event generated in 2016. The risk of a victory for the far right will again befall Europe in April (see graphic).
In the United States, the president will face his first big test, the midterm elections in November, with the Democratic Party divided and the Republican Party capable of obtaining a good result which generates a deadlock in the Administration. Inflation is the main stumbling block for Biden to present himself as the leader of the economic recovery.
In China, Xi Jinping will revalidate his position as leader of the Chinese Communist Party for a third consecutive time in 2022, something unprecedented in the history of the Asian giant. Meanwhile, tensions with the United States and with the European Union continue. In October, there will be elections in Brazil.