Reference News, March 18 report: According to the French newspaper "Les Echos" website on March 16, this week will be full of tension for major central banks. The Federal Reserve, the European Central Bank and the Bank of England will hold monetary policy meetings in succession, while the current situation remains shrouded in mystery.

Since the outbreak of the Middle East conflict two weeks ago, there has been no sign of easing. On the contrary, the military intervention that markets had originally expected seems to be turning into a prolonged one.

Aside from the geopolitical uncertainty, the focus of discussion will center on oil. Despite measures taken by many countries to release strategic reserves, the price of oil remains around $100 per barrel, far higher than the $70 per barrel before the US-Israeli military action against Iran.

Given that oil production and transportation facilities have been damaged, it may take weeks to return to normal after the conflict, so the high oil prices will persist longer.

The sharp rise in energy costs is bound to push up inflation, thereby affecting the monetary policies of central banks. Worse still, for central banks, the economy may be heading towards stagflation, a state where economic growth slows significantly while consumer prices soar.

Under this context, major monetary authorities find it difficult to determine the optimal course of action. They face a dilemma: either implement an accommodative policy to support the economy, which may exacerbate inflation; or tighten the policy to curb prices, which would slow economic growth.

At present, they don't need to make immediate decisions. The surge in oil and gas prices hasn't lasted long, and the impact on the economy and expectations is not yet quantifiable. However, concern is evident in communications between central banks and in Q&A sessions at press conferences.

However, due to differences in the specific situations of each currency area, the responses of the central banks may vary.

As for the Federal Reserve, the threat it faces seems smaller than that of its European counterparts. The United States is a net oil exporter, which alleviates the inflationary pressure caused by rising oil prices. Therefore, the Federal Reserve has more time to respond.

But President Trump holds a different view. On the 12th, he accused the Fed of not breaking the routine to cut interest rates sharply during the stock market crash.

Emergency rate cuts are extremely rare, having been used only occasionally in times of market panic over the past few decades. The last unconventional rate cut by the Fed was six years ago, when the spread of the pandemic triggered a global stock market crash.

Although employment data may provide a basis for monetary easing, investors do not believe the Fed will cut rates urgently, nor do they think the Fed will cut rates in the coming weeks. Instead, they worry that the rising uncertainty will prompt the Fed to remain cautious until the summer of 2027 before resuming the rate-cutting cycle.

Amid multiple uncertainties, the European Central Bank finds it difficult to maintain its "correct position" declared since the end of last year. However, this is not yet enough to force it to break the status quo and adjust the 2% deposit facility rate on Thursday.

It is certain that the factors supporting rate cuts last month no longer exist. Within two weeks, the euro has depreciated 3% against the dollar, falling below the 1.15 dollar mark. The risk of low inflation has also disappeared.

Bloomberg forecasts that if oil prices rise 20% to 30% from previous levels, inflation could reach 3% by year-end. The market bets that the European Central Bank will raise rates for the first time in July.

In London, the Bank of England is expected to keep the benchmark interest rate at 3.75% on Thursday. Before the conflict broke out, the market had expected the Bank of England to cut rates as inflation was steadily declining to 2%. But now, the uncertainty about the impact of the oil crisis on consumer prices will prompt the bank to adopt a cautious stance. (Translated by Wang Zhongju)

Original: toutiao.com/article/7618564290882126345/

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