This one is named Big Bass Bonanza Keeping it Reel, and if anyone is able to craft a fishing game with a twist, it's got to be Pragmatic Play and partner studio Reel Kingdom. The world’s financial markets are just waking up to that, too.Big Bass Bonanza Keeping it Reel: Slot OverviewĪnother day, another fishing slot rolls off the production line. But higher rates will damage the real economy and cause suffering. A slowing economy is ultimately necessary to restore price stability-it would be madness for the Fed to tolerate annual inflation of 8.3%, much of which is home-grown. It is only a matter of time before the unemployment rate starts rising. House prices are falling, banks are laying off staff and FedEx and Ford, two economic bellwethers, have issued profit warnings. If the bank follows through with rate rises, the housing market could collapse.Įven America’s economy, which has been resilient in the face of headwinds this year, is unlikely to keep growing through an interest-rate shock as severe as the one it now faces. Markets now expect the Bank of England to set the highest rates of any big rich economy next year but sterling has slumped all the same. They can support their currencies by raising rates in line with the Fed, but only at the cost of even lower growth. South Korea and Japan are suffering the knock-on effects of an economic slowdown in China, brought about by its housing crisis and zero-covid policy.Ī strong dollar, in effect, exports America’s domestic inflation problem to weaker economies. The energy crisis is about to plunge Europe into recession. Part of the explanation for the pressure on advanced-economy currencies is that many central banks have hitherto failed to keep pace with the Fed’s tightening-but with good reason, because their economies are weaker. In Japan the government has intervened to buy yen for the first time this century, despite the apparently ironclad determination of the central bank to keep interest rates low. The Bank of Korea is lending currency reserves to the national pension fund so that it buys fewer dollars in the open market. In Britain surging yields on government debt have failed to attract much foreign capital.
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Sweden raised rates by a full percentage point on September 20th and still saw its currency fall against the dollar. Some of the worst-performing currencies in 2022 are from the rich world. Today, if anything, they are showing greater signs of immediate stress. Excluding China, emerging-market currency reserves have fallen by over $200bn in the past year, according to JPMorgan Chase, a bank-the fastest fall in two decades.Īdvanced economies can usually withstand dollar strength. India, Thailand and Singapore have intervened in financial markets to support their currencies. China has responded by making it harder to short the yuan, which in the offshore market hit a record low against the greenback on September 28th. The surging dollar is painful for energy importers that were already grappling with higher costs. Yet it is outside America where the financial effects of the Fed’s monetary tightening have been most severe. Pension funds which gorged on opaque private assets in pursuit of higher returns when rates were lower must now tot up their losses as risky investments slump in value. Bankers who underwrote leveraged buy-outs when yields were lower are suddenly finding themselves hundreds of millions of dollars in the red. Junk-bond yields are already over 9%, which has caused the issuance of new debt to dry up. The cost of 30-year mortgages is nearly 7%.
The outlook for rates is rippling through America’s financial system.
The central bank expects to raise the federal funds rate to nearly 4.5% by the end of the year and higher still in 2023. Because the Fed has lost the first three or four rounds since prices began to surge in 2021, it is now swinging harder. The primary cause of the market chaos is the Federal Reserve’s fight with inflation.
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