Central bank interest rate hikes slow down
While hopes are rising that central banks are nearing the end of the interest rate hike cycle in markets, it is thought that global interest rate fever is no longer at its peak.
Financial markets are also anxiously awaiting global central banks to end their tightening measures.
EYES ON FED
The US Federal Reserve (Fed) raised the policy rate by 25 basis points to the 4.50-4.75% range, the highest level in 16 years, at the week’s meeting. Thus, the Fed slowed in two meetings in a row.
Fed Chairman Jerome Powell, on the other hand, said the disinflation process has started for the first time and the full effects of rapid tightening have so far yet to be felt.
On the other hand, this week’s jobs data upset investors, who were expecting dovish action from the Fed. Following the rise in employment by 517,000 against expectations of 188,000, expectations have risen that the Federal Reserve of US (Fed) continue to tighten monetary policy for a while.
Starting next week, verbal policy guidance from Fed officials will be effective in shaping market expectations.
INCREASES IN INTEREST CONTINUED IN EUROPE AND ENGLAND
During the week, the European Central Bank (ECB) and the Bank of England (BoE) also raised their policy rates by 50 basis points, in line with expectations. The emphasis on hawkish ECB and BoE stances to soften after the next meeting also eased markets.
This week will follow the decisions of the Reserve Bank of Australia and the Reserve Bank of India. Both banks are expected to increase by 25 basis points. However, there is a strong possibility that these central banks will end the cycle of interest rate hikes.
SIGNS OF PIGEONS OF RUSSIA AND CANADA
Russia is expected to shift its approach to QE at the central bank meeting on Friday. Furthermore, the Bank of Canada is one of the central banks expected to end the rate hike cycle.
The central banks of some countries such as Iceland and Sweden are among the banks believed to continue their aggressive stance.
INVESTORS WATCH CAREFULLY
High interest rates from central banks make investment instruments in gold and the stock market weak. The expectation that the Fed will be hawkish and that the real interest rate on the dollar may rise suppresses gold prices.
The Fed’s tight monetary policy is interpreted as a fact that strengthens the dollar.