The echo of the war on coronavirus has not yet died out, the surrender of the pandemic has not yet been signed, but there are signs that the world is beginning to be undermined by financial mines placed to combat the economic consequences of the pandemic.

We are talking about the huge amount of money that states have thrown in trying to restart economies that have slowed down in 2020. Between the risk of a jump in inflation and plunge into recession, the developed world has chosen the lesser, as it seems at the moment, evil. Helicopter money was preferred over the painful slide of the economy, but with the risk of inflation.

In this sense, the focus is primarily on the United States and the American dollar, liquidity has flowed where it is needed and most of all where it is not needed. Last year was one of the best for the financial markets, the dramatic drop in American indices by a third in March last year was overcome in a fairly short time. The long-awaited correction, which had been waiting for years, thanks to the ocean of liquidity, was overcome in just six months, and at the beginning of 2021 the market continued to renew its all-time highs.

Double-digit growth is seen in almost all asset classes, but not in economies. And here, more and more alarming voices begin to be heard, all that we observe now is asset inflation, it, of course, differs from consumer inflation and it is not targeted by central banks, monetary authorities, as a rule, do not set themselves the task of controlling it at all … But newspaper stripes and social networks are increasingly talking about the possibility of consumer hyperinflation in the United States, the situation has become so tense that the head of the Fed was forced to comment on it, speaking two weeks ago at a hearing in the Banking Committee of the US Senate.

Jerome Powell tried to calm the markets by noting that the Fed does not expect “inflation to rise to alarming levels” and that “the US economy should not fear hyperinflation as it recovers from the new crisis caused by the coronavirus pandemic.” And if inflation does start to rise to levels that are already uncomfortable, the Fed has sufficient tools to combat this phenomenon.

Jerome Powell indicated that the purchase of assets will continue for quite a long time until the economy shows a real recovery. Expectations for the second half of 2021 are very good for both the US and the global economy. Importantly, the Fed believes that unemployment and inflation are still far from their targets and monetary policy will remain the same. Markets strongly disbelieved Powell’s words and continued to flee bonds, in which it is absolutely pointless to sit out inflation in any of its manifestations. Words must be confirmed by actions, and here the Fed is not showing itself strongly at auctions for the placement of US Treasury bonds.

The current pause does not signal the end of the asset inflation phenomenon, and other factors are also affecting commodities. Freezes in Texas and a cut in production in Saudi Arabia are credited with influencing the current rise in quotations, but along with oil, quotations for metals and agricultural products continue to rise. Here, additional factors of influence are disruption of supplies, disruption of supply chains, problems with the import of labor due to the ongoing pandemic.

How will this affect Kazakhstan? The regulator cannot fail to see a significant pro-inflationary factor, therefore, it is not worth waiting for a noticeable decrease in the base rate in the current conditions. However, if the Fed begins to confirm its intentions by actions, then asset inflation will continue, and it is likely that oil may rise quite seriously. Before prices begin to affect the balance of payments, carry traders can enter the arena and attack the Kazakhstani foreign exchange market quite aggressively, the difference in nominal rates in tenge relative to popular currencies is quite huge, which could allow taking a big risk.

The last crusade of carry traders to Kazakhstan happened in 2015-2016, but a similar situation was in 2006-2007, when carry traders fronted positive changes in the balance of payments caused by the rise in energy prices. The free-float course is a good thing, but the benefits of a significant and rapid course strengthening can be questionable. If we simplify the language of macroeconomics and translate it into human, then the situation looks like this: in the structure of Kazakhstan’s GDP, government demand occupies a considerable part, and it is provided, among other things, by revenues from the oil and gas sector.

If the strengthening of the tenge leads to a situation where oil prices in terms of the national currency will decline, the oil and gas sector will face a drop in profitability and profits, which ultimately may negatively affect government spending and GDP. This suggests either an emergency introduction of a fiscal rule, or direct interventions by the central bank aimed at smoothing out exchange rate fluctuations, or whipping carry traders by sharply lowering the base rate.

So far there is no definite answer as to how likely such a scenario is and what the regulator can do, but it is worth paying attention to the situation. For a long time nothing interesting happened on the foreign exchange market, but the world does not stand still, and events eventually peep into the quietest corners of the planet.

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