The rate hikes marathon
Since the start of 2022: The Federal Reserve has raised its benchmark rate 10 times to 5.25% from 0.25%. The Bank of England has hiked its key rate 11 times to 4.5% from 0.25%. The European Central Bank increased its seven times to 3.75% from 0%. Source: Ignacio Ramirez Moreno
Fed left interest rates unchanged but suggest further hikes
Federal Reserve officials paused their series of interest-rate hikes but projected borrowing costs will go higher than previously expected.
Powell, speaking to reporters in a press conference Wednesday, faced the challenging task of explaining two possibly contradictory policies: deciding to leave rates unchanged following 10 straight hikes while also indicating that at least two more increases might be necessary this year, possibly as soon as July.
Source: Bloomberg
Federal Reserve to skip a rate hike
A gauge of dollar strength held near a one-month low on speculation the Federal Reserve will skip an interest-rate hike at a policy meeting ending Wednesday.
While US CPI data has cemented bets on a Fed pause, it also suggests that we might see more tightening later, which will ultimately slow the US economy.
Source: Bloomberg
ECB Balance Sheet is almost unchanged ahead of this week's meeting.
Total assets now at €7,714.4bn, equal to 57% of Eurozone GDP vs Fed's 32%, SNB's 121%, BoJ's 130%. Source: HolgerZ, Bloomberg
Bank of Canada raises key rate by 25 bps to 4.75% vs. 4.5% est.
The Bank of Canada defied expectations by restarting its interest-rate tightening campaign, saying the economy is running too hot.
Source: Bloomberg
How long can the Bank of Japan maintain its ultra-accommodating policy?
As Japan's core Consumer Price Index (CPI) reaches an impressive milestone of 4%, the nation finds itself at a pivotal juncture in its inflation landscape. This surge places Japanese inflation well above the Bank of Japan's (BoJ) target. While the BoJ's specific objective remains the maintenance of stable inflation at around 2%, the question arises: How long can the BoJ sustain its ultra-accommodative policy stance? With Japan's staggering debt-to-GDP ratio surpassing 200%, finding the right balance becomes crucial in addressing the potential challenges of runaway inflation. Source: Bloomberg
Doubts about a 25bp Fed hike tonight?
Today, Fed Governor Powell will present the conclusions of the Fed meeting, a crucial moment as the market believes it will mark the end of the Fed's rate hike cycle. Despite deteriorating macroeconomic indicators and another failure of a major US regional bank (FRB), the market believes there is a near 90% chance of a rate hike. Powell is also expected to emphasize that rates will have to remain high for an extended period of time as inflation remains high. However, there are doubts about how the Fed will take into account the recent failure of First Republic Bank and the ongoing debt ceiling situation. Note that there is no update on the US economic outlook and the dot charts.
ECB: A 25 Basis Point Hike Carved in Stone?
The next ECB meeting is coming up on Thursday and this morning two crucial data points were released. Eurozone core inflation saw a slight decrease in April from 5.7% to 5.6%, marking the first decline in 10 months. This is a positive sign that core inflation is heading in the right direction. Meanwhile, the ECB's bank lending survey indicated that credit standards "tightened considerably" in Q1. This shows that the ECB's monetary policy, which includes rate hikes and quantitative tightening, is starting to have an impact on the system. Source: Bloomberg
