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THE WORK OF CENTRAL BANKS (0808 GMT)
The Fed hasn’t yet started raising interest rates, and in the euro zone, higher rates are likely many months away. But markets have started doing the central banks’ jobs for them — an index of financial conditions compiled by Goldman Sachs is around the tightest since May 2020.
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Look at the metrics feeding into such indexes — since the start of this year, oil prices, government borrowing costs and yield premia on corporate debt have all risen , (.MERC0A0). With markets pricing rate rises ahead, world stocks are down 6%.
How financial conditions behave, inevitably impact the spending, saving and investment plans of businesses and households, so the more conditions tighten now, the less…