Global Market- US Fed, BOE & ECB meeting – Key takeaways
US Fed chair Jerome Powell refrain for making any commitment on pause or pivot.
This week we will discus key takeaways from 3 major central banks meeting, US Fed, Bank Of England – BOE and European Central Bank – ECB. Recent rally started after US Fed chair Jerome Powell speech 30-Nov-22 and soft US Economic data which followed after this speech.
US Fed meeting 13 – 14 December 2022 – Key points
• US Fed increase rate by 50-bps to 4.25% – 4.50% – In line with market expectation.
• Core inflation forecast increase to 4.80% from earlier 4.50% in September 2022 meeting
• Median forecast for 2023 raised to 5.1% up 50-bps from September 2022 meeting.
BOE – Bank of England meeting outcome on 15-Dec-22
• BOE raised rate by 50-bps to 3.50% – 9th increase this year.
• BOE MPC divides 3 ways on interest rate hike, 6 members for 50-bps, 1 for 75-bps hike & 2 members for unchanged.
• BOE MPC repeats willingness to act forcefully if needed.
ECB – European central Bank meeting outcome on 15-Dec-22
• ECB raised rate by 50-bps to 2.50% – In line with market expectation.
• ECB President Lagarde: “We have more ground to cover, we have longer to go and we are in for a long game.”
• Low change of rate hike returning to 75-bps, more rate hike of 50-bps seen.
Global central banks – obsession to bring long term inflation @ 2%.
Inflation in US @ 7.1% and in UK & Europe inflation is around 8% to 10%. Where as central banks rate for these regions are much lower. Central banks is obsessed to bring long term inflation at 2% target rate for long term sustainable growth, for this objective central banks are will and ready to take pain in near term.
Equichain Wealth Advisors: Market View & Opinion
We see the change in market sentiment after the outcome of all three central banks, US Fed, BOE & ECB. US & European market has rallied around 15% – 20% from June / July 2022 lows on expectation of inflation problem is behind us.
We believe, it is time to get cautious as central banks will remain major force and they are willing and prepared to take pain in near term for larger long-term objective.