As investors, we are used to thinking of the Federal Reserve in the United States as the global central bank because if the Fed tightens monetary policy as it is prone to do throughout 2022, the repercussions are felt throughout the world through a stronger US Dollar and higher interest rates on US Treasuries. So, as the Fed hikes interest rates in 2022, we should expect European and UK bond yields and credit spreads to rise as well because money is becoming more expensive in the largest economy of the world, and that tightness reverberates in the Eurozone, the UK, and everywhere else where there are close trade links with the United States.
There is more than one global central bank
There is more than one global central bank
There is more than one global central bank
As investors, we are used to thinking of the Federal Reserve in the United States as the global central bank because if the Fed tightens monetary policy as it is prone to do throughout 2022, the repercussions are felt throughout the world through a stronger US Dollar and higher interest rates on US Treasuries. So, as the Fed hikes interest rates in 2022, we should expect European and UK bond yields and credit spreads to rise as well because money is becoming more expensive in the largest economy of the world, and that tightness reverberates in the Eurozone, the UK, and everywhere else where there are close trade links with the United States.