Rate hike market

Share to Twitter Share to Linkedin Topline Stocks fell slightly on Wednesday as a growing number of major Wall Street firms warned that the likelihood of a recession has risen sharply, while Federal Reserve Chair Jerome Powell pledged that the central bank is “ strongly committed ” to raising rates until inflation moderates. Key Facts Markets finished lower in choppy trading: The Dow Jones Industrial Average fell 0.2%, less than 100 points, while the S&P 500 lost 0.1% and the tech-heavy Nasdaq Composite 0.2%. The Dow was down by as much as 400 points but stocks pared back losses following comments from Fed Chair Powell, who said the central bank is “determined to take the measures necessary to restore price stability” and that “ongoing rate increases will be appropriate.” Citigroup became the latest Wall Street bank to increase its recession odds, meanwhile, forecasting a 50% chance of a downturn as consumer demand “looks to be … [Read more...] about Stocks Fall After Powell Pledges More Big Rate Hikes To Combat Inflation

Share to Twitter Share to Linkedin As it worked to bring interest rates back toward neutral in the face of too-high inflation, before reassessing conditions, the U.S. Federal Reserve has been somewhat data-independent barring a “break the glass” moment. The Fed appears to have arrived at that moment. The Fed slammed on the inflation brakes hard on June 15, raising rates 75 basis points (bps). This action increases the risk of a policy error: if the Fed overtightens in trying to curb inflation, it could inadvertently slow the economy so much that it induces a recession rather than a “softish” landing. Fed Chair Jerome Powell admitted as much the following week in testimony before the U.S. Senate Banking Committee. When asked if the Fed’s moves could lead to a recession, he replied, “It’s not our intended outcome at all, but it’s certainly a possibility.” Inflation remains a big problem: 8.6% against the Fed’s 2% target is akin to doing 73 miles … [Read more...] about Big Fed Rate Hike Risks Policy Error That Could Lead To Recession

Share to Twitter Share to Linkedin Topline Federal Reserve Chairman Jerome Powell pledged in testimony before Congress on Wednesday that the central bank is “moving expeditiously” to raise interest rates and remains “strongly committed” to doing so until there is “compelling evidence” that inflation is normalizing. Key Facts In his semiannual testimony on monetary policy to Congress, Powell faced questions from lawmakers about how the central bank will proceed as it looks to combat surging inflation, which remains at 41-year highs. The Fed raised rates by 75 basis points last week—its largest increase since 1994, with Powell also signaling that a similarly large rate hike is likely at the next policy meeting in July. Speaking to Congress on Wednesday, Powell pledged that the Fed wouldn’t hesitate to keep raising rates at a fast clip—and further than projected—if higher inflation continues to persist. “It is essential that we bring … [Read more...] about Powell Says Fed Will Continue Hiking Rates Until There Is ‘Compelling Evidence’ That Inflation Is Slowing

A woman in Mumbai mistakenly gave away her bag of gold jewellery to a beggar (Representative Image) Gold prices edged up on Tuesday as the dollar eased, while investors kept a keen eye on posturing from major central banks on interest rate hikes for a clearer outlook for bullion. A weaker dollar makes greenback-priced bullion more attractive for buyers holding other currencies. [USD/] Spot gold was up 0.2% at $1,841.13 per ounce by 0200 GMT, after largely range-bound trading on Monday. U.S. gold futures firmed 0.1% to $1,842.90. However, benchmark U.S. 10-year Treasury yields rose, capping gains in zero-yielding gold. [US/] "The (gold) market is sitting tight as, after a historic week for global central banks; policymakers will get to explain the reasoning behind their decisions this week," said Stephen Innes, managing partner at SPI Asset Management. Close The U.S. Federal Reserve last week approved its largest interest rate increase in more than a quarter … [Read more...] about Gold inches higher as dollar dips; wider rate-hike narrative in focus

Share to Twitter Share to Linkedin Topline The Federal Reserve’s “heightened sensitivity” to rising inflation expectations could be triggered by a barrage of political ad campaigns that are expected to highlight surging consumer prices ahead of the midterm elections in November, analysts at Goldman Sachs warned on Friday, adding that the central bank may feel “compelled” to keep hiking rates aggressively. Key Facts With the midterm elections looming in November, surging consumer prices will be a major issue for voters—especially as long-term inflation expectations have surged in recent months, according to the latest consumer sentiment survey released by the University of Michigan on Friday. Meanwhile, the Federal Reserve watches long-term inflation expectations closely, and used it in its decision earlier this month to raise interest rates by 75 basis points—the largest increase since 1994. The central bank’s “strong reaction” to the … [Read more...] about Political Ads Targeting Inflation Ahead Of Midterm Elections Could Force The Fed To Keep Hiking Rates: Goldman Sachs

The world's central bank umbrella body, the Bank for International Settlements (BIS), has called for interest rates to be raised "quickly and decisively" to prevent the surge in inflation turning into something even more problematic. The Swiss-based BIS has held its annual meeting in recent days, where top central bankers met to discuss their current difficulties and one of the most turbulent starts to a year ever for global financial markets. Surging energy and food prices mean inflation in many places is now its hottest in decades. But the usual remedy of ramping up interest rates is raising the spectre of recession, and even of the dreaded 1970s-style "stagflation", where rising prices are coupled with low or negative economic growth. "The key for central banks is to act quickly and decisively before inflation becomes entrenched," Agustín Carstens, BIS general manager, said as part of the body's post-meeting annual report published on Sunday. Carstens, former head of … [Read more...] about Banking body urges decisive wave of global rate hikes to stem inflation

- A + A (June 22): Federal Reserve Chair Jerome Powell said the Central Bank will keep raising interest rates to tame inflation and conceded that a US recession was “certainly a possibility”. “We anticipate that ongoing rate increases will be appropriate,” Powell said Wednesday in his semiannual testimony to the Senate Banking Committee. “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook.” Powell’s remarks largely reiterated comments at a press conference last week after he and his colleagues on the Federal Open Market Committee raised their benchmark lending rate 75 basis points — the biggest increase since 1994 — to a range of 1.5% to 1.75%. While Powell told reporters last week that another 75 basis-point increase, or a 50 basis-point move, was on the table for the next meeting in late July, Wednesday’s text made … [Read more...] about Powell sees ongoing rate hikes, says recession a ‘possibility’

- A + A BENGALURU (June 24): Gold prices were flat on Friday (June 24) but on course for their second straight weekly decline, with worries over major central banks potentially implementing big interest rate hikes to target runaway inflation weighing on bullion demand. Spot gold was last up 0.1% to US$1,824.72 (about RM8,036.98) per ounce at 0215 GMT after hitting a one-week low of US$1,820.99 earlier in the session. US gold futures fell 0.2% to US$1,825.90. Gold prices have dropped about 0.9% this week. The US Federal Reserve's commitment to reining in 40-year-high inflation is "unconditional", its chair Jerome Powell told lawmakers on Thursday, even as he acknowledged that sharply higher interest rates may push up unemployment. "The US dollar remains firm and expectations now lean towards a 75-basis-point Fed hike in July. The TIPS spread — a market based proxy for inflation expectations — is also near a four-month low, and these have kept a lid on any gold … [Read more...] about Gold set for second straight weekly drop on worries over big rate hikes

- A + A NEW YORK/BENGALURU (June 24): Wall Street's main indexes climbed more than 2% on Friday, as signs of slowing economic growth and a recent weakening of commodity prices tempered expectations over how high the Federal Reserve will raise interest rates to rein in inflation. Global financial markets have been roiled this month on worries that rapid rate hikes by major central banks could cause a recession, with the benchmark S&P 500 confirming a bear market last week as it recorded a 20% drop from its January closing peak. The three main indexes looked set to notch their first weekly gain of the month, boosted by megacap growth stocks and defensive sectors such as healthcare and utilities seen as safer bets during times of economic uncertainty. "The reality is there's some optimism that the weakening economy, the stronger potential for a recession down the road could actually impede the Fed's aggressive hiking schedule," said Ryan Detrick, chief market … [Read more...] about Wall St rallies as traders dial back rate-hike bets

The 25-basis-point (bp) increase in the key interest rate of the Bangko Sentral ng Pilipinas (BSP) announced on Thursday that affirmed a gradual path to tightening of monetary policy was a disappointment to analysts who believe the BSP should be more aggressive. But Pantheon Macroeconomics said the next hike might not come until next year. Miguel Chanco, the United Kingdom-based research firm’s chief economist for emerging markets in Asia, said in a commentary that this week’s rate hike—a repeat of the Monetary Board (MB) decision in their meeting last May—was “a no-brainer.” Chanco said this was so, especially considering that BSP Governor and MB chair Benjamin Diokno had explicitly said that this month’s decision was likely a 25-bp increase in the interest rate on the central bank’s overnight borrowings from banks. “Not surprisingly, inflation remains front-and-center in the board’s mind, as it raised its inflation forecasts further to 5 percent and 4.2 percent for this year … [Read more...] about Contrarians see BSP pushing back next rate hike to 2023