Taming Polish prices may trump economic stimulus
Wednesday, September 7, 2022
Significance
The surge was driven by Russia’s announcement that it was halting indefinitely supplies through the Nord Stream 1 pipeline. The new has deepened fears of a severe economic downturn in Central Europe and the euro-area just as the ECB hints at a sharper tightening of monetary policy.
Impacts
- Expectations of more aggressive euro-area interest rate rises are raising Germany’s ten-year bond yield, in negative territory in March.
- Much higher yields are drawing sizeable inflows of foreign capital into Central Europe’s bond markets despite the bleak economic outlook.
- Falling Brent crude prices, reflecting fears of a global recession, are raising expectations that the worst of the inflation crisis is over.