Putin’s new order adds tension to a session marked by the rise in US interest rates
Maximum caution in world stock markets pending the announcement by the US Federal Reserve (Fed) of its monetary policy decision, which will be announced while European markets are already closed. The big question is whether the institution will decide to hike rates by 75 basis points or, as some voices have pointed out in recent days, dare to push through a historic 100 basis point hike.
However, investors are starting to look further afield, and the main concern is uncertainty about how far interest rates will have to go to achieve their primary goal of pushing inflation back. In other words, in addition to the rate hike itself, the market will pay special attention to the so-called dot plot, in which members of the Fed’s board formulate their expectations for official rates.
Perspectives have been practically changing for weeks. At the end of August, the market discounted that the interest rate peak would come to 3.98% in March 2023. Now that expectation stands at 4.48%. And it is that Fed President Jerome Powell has been making it clear for some time that it is necessary to see a “consistent pattern” with the decline in inflation before lifting the accelerator.
Given the uncertainty about the level of the unobserved neutral interest rate, policymakers have made it clear that they want inflation on a sustained downward path, which I interpret as core inflation falling for at least several months, from manager PIMCO.
Against this background, in anticipation of the Fed, European stock markets open with declines and the Ibex-35 returns 0.8%, with a risk of 7,800 points.
Investors are also very aware of the debt market, where bond yields have risen again in recent days on the expectation of further rate hikes, reaching maximums of more than a decade in the case of US bonds. Specifically, profitability (which moves inversely to price) remains at 3.5%, despite the slight decline on Wednesday. The 10-year Spanish bond also remains above 3%, the highest level since 2014.
In the commodities market, oil prices are rising again, with the tension added by Vladimir Putin to the day after calling on Russian citizens in the reserve to continue fighting. The price of a barrel of Brent, a reference in Europe, rose by 3% above USD 93, while West Texas in the US exceeded USD 86.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
