Home » Wall Street and markets at attention: this week rate announcements from the Fed, the ECB and three other central banks

Wall Street and markets at attention: this week rate announcements from the Fed, the ECB and three other central banks

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Wall Street and markets at attention: this week rate announcements from the Fed, the ECB and three other central banks

Wall Street restarts by opening a crucial week, in which Jerome Powell’s Fed will be the great protagonist. The FOMC – monetary policy arm of the US central bank – will in fact meet tomorrow, Tuesday 13 December, for a two-day meeting, which will end the day after tomorrow 14 December with the announcement on US rates. At 6.30 am Italian time, futures on the main American stock indexes are slightly down: they range from -0.05% of futures on the Dow Jones to -0.11% of futures on the S&P 500 and a drop of 0.16% in Nasdaq futures.

With regard to the Fed, market expectations are for a 50 basis point rate hike, after four consecutive 75 basis point tightenings, which brought the cost of US money to its highest level since 2008, between 3.75% and 4%. %.

However, traders’ fear is shifting more and more from the extent of monetary tightening to the value of the terminal rate, ie the final rate, which Fed chairman Jerome Powell himself said could be confirmed as higher. Also on 13 December, crucial data will be released so that the Fed understands the direction of US inflation and therefore also of the rate hikes still necessary to dampen the price race: the CPI index for November.

Last Friday, the inflation measured by the PPI index, ie the producer price index, relating to the month of November was released.

The numbers were not entirely reassuring, as they exceeded analysts’ estimates. On a monthly basis, the PPI index rose by 0.2%, more than the 0.3% increase expected by the consensus. On an annual basis, growth was 7.4%, beyond the +7.2% expected. The growth of the core component was also stronger than the estimates which, on a monthly basis, advanced by 0.4% in November, double the +0.2% expected, and which rose by 6.2% on an annual basis. over the estimated +5.9%.

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At this point, expectations are for the publication of the November consumer price index (CPI), which will take place as mentioned tomorrow, December 13th.

The fear that even the CPI could confirm higher than expected inflation growth sunk the US stock market last Friday:

the Dow Jones Industrial Average tumbled 305.02 points, or -0.9%, to 33,476.46 points; the S&P 500 fell 0.73% to 3,934.38, while the Nasdaq Composite retreated 0.7% to 11,004.62. On a weekly basis, the Dow fell 2.77%, ending its worst week since September; the S&P 500 fell 3.37%, while the Nasdaq slipped 3.99%. Ten-year US Treasury rates rose to 3.58%, while two-year rates rose to 4.342%.

But this week the Federal Reserve will not be the only central bank involved.

Also expected were Christine Lagarde’s ECB (Thursday 15 December) and also on Thursday the Bank of England, the SNB (Swiss National Bank) and the Norges Bank, the central bank of Norway.

On Friday Francois Villeroy de Galhau, governor of the Banque de France, Bank of France, and a member of the Governing Council of the ECB, made it clear that he could not rule out a recession in the Eurozone. Market expectations are for a further rate hike of at least 50 basis points, after the tightening that led rates (on deposits) to rise from -0.50% in June to 1.5% in October.

Christine Lagarde’s ECB announced on 27 October a new maxi rate hike of +75 basis points, after the historic one, the first of that intensity since the birth of the euro, on 8 September last. Interest rates on the main refinancing operations, the marginal lending facility and the deposit facility will be raised to 2.00%, 2.25% and 1.50% respectively.

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Recently released data confirmed that inflation growth has also slowed pace in the eurozone, with the eurozone consumer price index rising 10.0% annually in November, compared to 10.6% in October and at the 10.4% expected by analysts. However, this is a much higher rate of growth than the ECB’s rate target of 2%.

Philip Lane, the ECB’s chief economist, said last week that he expects more rate hikes from the central bank, adding however that he believes much has already been done.

“It is not clear whether the peak of inflation (in the euro area) has already been reached or if it will be next year – said Lane – and we cannot exclude some inflation at the beginning of next year”.

In any case, “it will be necessary to take into consideration the previous rises in rates, in order to evaluate future ones”.

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