Economists say good riddance to 2022, the year most of them were spectacularly wrong about inflation
FortuneDec 15, 2022
On Thursday, the European Central Bank (ECB), the Bank of England (BoE), and the Swiss National Bank (SNB) decided to increase interest rates by 0.5 percentage points — following a similar rate hike by the US Federal Reserve announced Wednesday — after consecutive raises of 0.75%.
Christine Lagarde, the ECB president, has promised at least two more 0.5 percentage point increases in February and March and has claimed that Europe has "longer to go" than the Fed in terms of policy and action. Meanwhile, BoE governor Andrew Bailey stated the UK's tight labor market, in combination with rises in wages and prices, justified "further forceful monetary policy."
There were many factors that contributed to the catastrophic economic landscape of 2022. As inflation has run rampant and Western tension with Russia has increased once again, many see some form of European recession in 2023 as a near-certainty. However, inflation numbers in Europe and the US are edging down, albeit tentatively, and there may be light at the end of the tunnel.
The cause of price hikes and the need to increase interest rates has not been the result of wage rises, as central banks have pointed to. Rather, blame can be placed on the inability of capitalist governments to deal with COVID, the US-led NATO war against Russia in Ukraine, giant corporations keeping mass profits, and the pumping of trillions of dollars and euros into the financial system. Workers' wage demands are not being met, and the working class is continuing to suffer under the current global economic system.
There is a 50% chance that the fed funds rate will be more than 3 percentage points at the end of 2023, according to the Metaculus prediction community.