Economists at Deutsche Bank assess the outlook for markets and the global economy regarding the pace of rate hikes by central banks and inflation. 

Rate hiking cycle has claimed another victim with regards to FTX

“It’s feels to me we’re in a race against time for markets and the global economy over the next 12 months. Can inflation slow quickly enough for central banks to be able to slow down their hiking cycles enough to avoid systemic accidents? Last week was a great mini case study of the race to come as the bankruptcy of crypto exchange FTX battled it out with a big downward surprise in US inflation. Ultimately the latter won out handsomely, but you can’t help thinking that the rate hiking cycle has claimed another victim with regards to FTX even if other things might also be at play with this company.”

“Most people I speak to don’t think the current crypto implosion is systemic and this could very well be correct. However, what’s next to unwind/unravel in a hiking cycle that’s not over yet even with slower US inflation last week? The way I like to think about it is that it’s much easier for things not to be systemic when US payrolls are still averaging +289K as they have been over the last 3 months. They averaged +444K in H1. Fast forward 6-9 months when they’re likely to be negative and things that break in the financial system could easily turn more systemic.”