When I was in college, My teachers teach me that inflation is like a rat that is continuously eating cash that is lying around. so don’t keep the ideal, Invet it in such a way that it will generate more return than inflation. After I came to the real world, I listen to many people talking about inflation being nonexistent. I mean how? then what was real? was my whole college degree was telling me something which doesn’t exist? I don’t know.

The reason I am talking about all this is in recent times many Central bankers being heavy on interest rate hikes. A few years back FED rate cut was the word, Now it’s Rate hike and Tapering.

While I am writing this in early November, I am sure the picture will hardly change. FEDERAL reserve increased rates unprecedented 5th time. When this all started, some people were not watching anything more than 4 hikes. The target rate for them was also not what it is around what it is right now, 4%. Though Jerom Powel said that hereafter hikes will be less, the statement itself gives hint that this is not an end. There will be more hikes.

On the front of the Reserve bank of India, it was a different fight. RBI sets its inflation target for itself as 4% +/- 2 which is 2%-6%. for more than 6 months, it was above that, making RBI write an explanation to the Government why this happened. India accepted the current rule since Urjit Patel was governor. It was seen as something which was there. hardly anyone was expecting this to happen anytime or if someone was expecting, not expecting such soon.

Canadian central Bank, another big Central Bank, handling its issues like the real estate market, also increased rates at a record fast pace. Bank of England, while just coming out from its nightmare named Mini budget, also increased rates and said that England will soon face the longest recession since 1930. Their bond buying helped for some time but the Calculation of insurance companies and pension funds went for a toss, which is not good for a country, still waiting to return to its pre-pandemic level of growth. IMF predicted GDP growth for England in 2023 is 0.3%.

In the early part of the year, I wrote my views about what will the finance and investment world look like in 2022. You can read the post Investment decision in 2022: Really what are risks? I wasn’t sure about the war. I mean I was listening to the US commentary about the Russian military in Belarus but somewhat I assumed that the war will not take place. I am aware and was also aware that the Crimea annexation and fight in Donbas were going on. For me, inflation and interest rate risk were sufficiently high. But war makes it all more highlighted. I wrote about it all in my various posts. Ukraine war: What will be the effects on the world after the war

In France and Germany, it is not different even though they are facing big risks of inflation and the cost of living crisis. But the way they were trusting Russia and not building sufficient big storage was a shock. Another point is Former German chancellor Angela Merkel nearly sold out her independence of energy to Russia. But the war made one thing clear to England they didn’t have any storage for gas and a contract of such gas can be used as a weapon.

Another highlight of this year is the fight between currencies. It was all sanctions that make the Russian currency rubble more highlighted. The decision to increase the rate from 9.5 to 20% was maybe right but when they started reducing it, it was clear that the strength was pumped up. But that helped china and Russia to come close to each other. Offshore Chinese currency RMNB, CNH. Many other countries started to prefer that. But many of them didn’t realize that at the same time, the dollar squeeze was started. Many developing markets’ currencies fall in value. It was a clear sign, Dollar is not that weak which you can easily win. The power of the FED can easily be won over with the help of its humongous balance sheet.

But when they decided to reverse it, they realise that it was almost impossible. Manu times there was no buyer. What else could happen when the Biggest buyer turned seller?