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Will Rate Hikes Tank the Economy?

15 mins.
14 JUNE, 2022
análisis macroeconómico
Leopoldo Torralba
Ignacio de la Torre
Macro Global Monetary Policy Spain Global US Europe AER Global AER Personal
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In recent decades, the economic environment is probably one of the most difficult to understand and accurately forecast, and it has the added risk of a wide range of feasible alternative scenarios with rather binary impacts (i.e., an error in one direction or the other can generate very significant economic damage). Thus, the last two weeks have been marked by very considerable abrupt movements in the markets, interest rates, stock markets, currencies, commodities, etc. Rate hikes and stock market plunges have been very pronounced, and their potential impacts may be very significant for all agents in the future.
What has transpired over the past two weeks?
What is actually inducing fear in the markets?
What can we expect moving forward?
What might then become of inflation throughout 2023?
How can our inflationary scenario affect growth?
Are there serious risks of second-round effects?

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