Inflation, Fed and ECB ready for new rate hike in May
The US Federal Reserve’s next rate decision will come mid-week followed immediately by the ECB. What will their decisions be to cool the economy? Will they decide to stop the increases, to slow them down or to stop in a trend that has been going on since last year and which is putting a strain on the economies of developed countries?. The majority of economic observers and stock market operators bet on the first hypothesis, that of new increases, which however could be the last or penultimate.Indeed, the Fed is expected to raise rates by only 25 points between 5% and 5.25%. to put a stop to an American economy which, while continuing to grow (+1.1% in the first quarter) is doing so with the handbrake. For Europe the situation is slightly different. It is expected that the ECB will decide on a perhaps more substantial increase, around 50 basis points, with the forecast of another two increases, in June and July.
Inflation, the risks of too much credit crunch are clear to Powell
The number one of the Fed, Jerome Powell, had started the uptrend before Christine Lagarde and has been able to see in advance the damage that high rates have done to the stars and stripes economy. The difficult situation of some medium-sized banks, less controlled by the rules reserved for large ones, was clear and convincing proof of this. Some operators argue that “Perhaps the consequences of lower growth and inflation in the US could convince the Fed to stop tightening monetary policy. We believe that the time to stop is near ”.
Inflation, the ECB could only stop the increases in September
Many are convinced that the Fed has enough economic data to consider the option of halting the hikes “It is clear to all that the uptrend is putting pressure on the US economy and the recent turmoil in lenders can be very dangerous”. While, on the contrary, the ECB does not have all this information. But the great flop of the Swiss Credit Suisse sounded a loud alarm bell. For this reason, analysts are convinced that Lagarde will keep the trend longer. The forecast for May is 25/50 points up. In Goldman Sachs, the most “popular” forecast for the Eurozone is of interest rates, before the Silicon Valley Bank crack, i.e. a terminal rate for the deposit facility of 3.75%, from the current 3%. (that is, a quarter of a point in May and another two equal increases in June and July). For many operators, the upward trend would stop in Europe in September. It will be seen, in the coming months, how right the operators’ economic acumen will have been.
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