Goldman Sachs imagines the rate stop
Fed day has arrived. It’s been a roller coaster week. In six sessions the indexes fell, bounced, fell again, and bounced again, in the end, after everything that happened, we are back to square one. The Eurostoxx 50 is practically at the same level as it was six days ago, while everyone’s stress level is slightly above it.
But while the indices of Bag seem to have forgotten what happened in these six days, the Fed will not be able to help but consider what happened.
Price stability
On the one hand, the Fed will in any case be called upon to pursue the objective of price stability and inflation convergence to 2%, on the other it will not be able to ignore the tensions on the financial system, on the world of regional banks, tensions caused by monetary policy restrictive aimed, in fact, to combat inflation.
Delicate task of the Fed
The Fed’s task is difficult and delicate. No analyst now believes a 50 point rate hike is likely. But the opinions and expectations among the various market operators are very divergent.
There are those who like Nomura even believes a 25-point cut is probable, and who like Goldman Sachs wishes for a break. Many believe a 25-point increase is probable, which would probably be the “right” one? middle ground that would end up pleasing everyone.
In London, inflation is picking up again
As you remember Gabriel Debach, market analyst at eToro the market is once again “betting strongly on an increase of 25 basis points during the day, with an estimated probability of around 86%, and even for a subsequent increase of another 25 basis points in May”. According to the analyst, the certainly not positive signal coming from Great Britain should not be underestimated “with consumer inflation rising to 10.4% compared to an expected drop. Publication that reverses three consecutive months of slowdowns leaving UK inflation above 10%, unique among major economies.
Pause for reflection
But the hypothesis of a break cannot be ruled out at all. As he points out Goldman Sachs, in the past the Fed has always avoided raising rates in the presence of financial stress, it has always waited some time to try to understand the extent of the crisis. This unless it did not have tools capable of dealing with the crisis anyway.
In summary, the game on rates is still open and it will be interesting to read the press release this evening.