The United States Federal Reserve (Fed) kicked off this Tuesday monetary policy meeting to decide whether to raise rates again. The agency’s chairman, Jerome Powell, will announce the decision this Wednesday, but the market expects rates to rise 0.25%, making this the last increase after the regulator’s 10 consecutive rate hikes since March 2022. The banking storm that occurred in the United States after the fall of First Republic Bank. “For now, the market mood suggests that investors expect the Fed pivot to be very close. Powell’s speech will be key. If Powell opens the door for more rate hikes, there could be a strong spike in volatility, operators.” “It can be very tense,” says IG analyst Sergio Ávila.
“Facing financial stability concerns, Fed will likely take a break after May’s decision”In a recent report reported by the EFE news agency, says Silvia Dall’Angelo, senior economist at investment manager Federated Hermes. Its forecast marks a 0.25 percent increase, as forecast by AXA IM chief economist Gilles Möec. In another recently published comment, “We expect a final preventative increase of 25 basis points, but the real discussion in the coming months will be how long this position should be maintained.”
The ECB is meeting this Wednesday to make the same decision on whether to raise rates again. “For the ECB, the market is discounting at least two more increases than those that have already made 25 basis points, so we expect to see this increase at the next monetary policy meeting,” said Sergio Ávila. incoming data inflation The euro zone’s rate in April shows that this is still high, as it remained at 7%.. “A 25 basis point rate hike is strongly supported by a one or two percentage point increase in the coming months,” said Craig Erlam, UK and Europe market analyst at Oanda.
Uncertainty of banks
Members of the Fed’s Federal Open Market Committee (FOMC) at their previous meeting in March Given the uncertainty caused by the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank, it decided to increase rates by only a quarter point. and the bailout of First Republic Bank. While the reasons for the bankruptcy are extensive, the investigation into what happened shows that the institution’s financial situation deteriorated due to monetary policy.
After announcing the March decision, Powell announced at a press conference that after these events, interest rate hikes may not be enough to control inflation. and “some additional strictness policy may be appropriate.” Markets were rocked again last week by the sharp declines in the First Republic bank stock market, although leading economic officials in the country, including Powell, have insisted in recent weeks that the situation will not lead to a financial crisis.
The crisis was once again under control after US bank JPMorgan Chase announced that it had purchased the asset., but nothing can guarantee that new critical periods will not come in the banking industry. Despite this, the Fed remains clear on its target of returning inflation to 2%. According to the latest data of this indicator, the inter-annual ratio continued to decline in March for the ninth consecutive month and remained at 5%, one point below February.