Once again for central banks. Both the US Federal Reserve (Fed) and the European Central Bank (ECB) are holding monetary policy meetings to raise interest rates this Wednesday and Thursday, respectively. yes ok the rise in the price of money was guaranteed in both houses, market consensus is that Jerome Powell (Fed) will start to put the brakes on and rate hike will be 25 basis points. However, an increase of 50 points is expected in the Old Continent (ECB). The consequences of these moves for citizens’ pockets translate into more expensive mortgages, but also higher yields on financial securities such as Treasury bills and others related to fixed income, which currently have a 3% one-year interest rate. “Euribor, one of the main indicators that determines the mortgage price, could reach 3% or 3.5% this first quarter. This translates to an increase in the average mortgage cost of around 3,000 euros per year,” says JoaquÃn Robles. , analyst broker XTB.
Inflation in the European Union continues unabated and closed at 9.2% last December.According to Eurostat data, therefore, the ECB, which has the mandate to keep the price increase around 2%, is forced to step on the accelerator. “The ECB is a little behind. At the last monetary meeting, the head of the institution gave signals to the market about the steps to be taken. We are likely to see two increases of 50 points and an increase of more than 25 points. Óscar MartÃnez, deputy portfolio manager of the Norbolsa estate, explains that at 3.5%. United States The price increase was 6.5% in December, slightly below the US benchmarks, in. “They started raising the price of money earlier, we’re a little behind in Europe,” says MartÃnez.
According to preliminary data for the fourth quarter of 2022, Eurozone GDP data continued to grow at a meager 0.1% compared to 0.3% in the previous three months. Thus, at the end of last year, although the expansion of the eurozone came to a halt. Minimum since the first quarter of 2021, the region eliminates the risk of a technical recession, which means two-quarter contraction in activity. The report said, “In the euro area, the pressure to increase interest rates on the European Central Bank will continue in the coming months despite the recession risks. However, we can expect interest rates to peak in the first half.” Fixed income renaissance From Credit Suisse.
Despite this, central banks continue to raise interest rates, supporting the entire fixed income segment of the market. “In 2024, interest rates will continue to be above 4% in the United States. This is a good time to bet on fixed income and build a portfolio. We haven’t seen an opportunity like this in ten years.. “The start of the year has been particularly good for the debt market,” says Joanna Galindo, head of Fixed Income and Structured at Tressis.
Anger over Treasury bonds is so strong that the Bank of Spain will request advance appointments from February 7 to avoid “unnecessarily waiting” for savers. These products now offer returns of up to 3% in 12 months. “A clear competitor for bank deposits”says Joaquin Robles.
“We bet on corporate loans, three to five year bonds are a good option. Regarding the Treasury, we liked it too, however, we would limit this to the purchase of securities with a maturity of two years.‘, explains Óscar MartÃnez of Norbolsa.
speech change
Despite the dark clouds, analysts are starting to see the light at the end of the tunnel. “We will see a change of speech in 2023. Lagarde was very aggressive in his last appearance. but we’re already seeing movements similar to that of the Bank of Canada.Óscar MartÃnez increased the rates by 25 points to 4.5% in his last meeting,” he said.
Related news
“With this modest increase, expect to pause rate increases until further evaluation. To be clear, this is a conditional pause: conditioned to the development of the economy. “If we have to do more to bring inflation to the 2 percent target, we will.”
The reopening of China and the moderation of inflation brought some optimism and confidence in the stock markets. “We believe we have reached the inflationary peak. The Fed also changed its rhetoric. We will soon see interest rate hikes lessen and perhaps lower rates at the end of the year.“Concludes the Norbolsa analyst.
Source: Informacion
James Sean is a writer for “Social Bites”. He covers a wide range of topics, bringing the latest news and developments to his readers. With a keen sense of what’s important and a passion for writing, James delivers unique and insightful articles that keep his readers informed and engaged.