When not even a war deters central banks from tightening monetary policy, investors should know they are on perilous ground.
On Thursday, the European Central Bank said it would scale down its bond buying faster than previously planned, opening the door to interest-rate increases later this year, even though its president,
Christine Lagarde,
admitted that “economic activity could be dampened significantly” by the war in Ukraine. The ECB cut its baseline projection for eurozone economic growth in 2022 from 4.2% to 3.7%, with a more “severe” scenario bringing it down to 2.3%.
All in all, it is surprising how little the conflict appears to have increased the risk of recession as perceived by central banks. Next week, the Federal Reserve seems unlikely to deviate from its plan of prioritizing the…
