Global Market – It’s a “Pause” or “Indicative Pivot”
This week we will discuss all three central bank’s meeting outcome and its impact on global sentiment and interest rate policy. Our focus will be that whether it will be “Pause” or “Indicative pivot”. US Fed & ECB meeting outcome was in-line with estimate and BOJ outlook and guidance was positive as they maintain JGB yield curve at -0.50% to 0.50%.
US Fed meeting outcome on 14-Jun-23
• US Fed kept interest rate unchanged after 15-months of rate-hike cycle.
• Current interest in US at 5.25% is same rate as seen in 2007, back in 2006 – 07 – interest rate remains at 5.25% for 14 months before interest rate heads downward.
U.S. Fed chair Jerome Powell had signaled that they would prefer to skip rate hike at June meeting, while still leaving room for a hike in coming months, if needed.
ECB meeting outcome on 15-Jun-23
• ECB hikes rate by 25-bps to 4.00%. Deposit rate now stands at 3.50%, highest level in more than 2-decades.
• ECB guides for continuation of rate hike to bring long term inflation at 2% and to keep interest rate higher as long as necessary.
BOJ meeting outcome on 16-Jun-23
• BOJ kept interest rate by -0.10%, maintain interest rate at ultra-low level.
• BOJ signaled JGB yield curve between -0.50% to 0.50%.
• BOJ maintain its current pace of quantitative easing, and said that it will continue to purchase exchange-traded funds and Japanese real estate investment trust.
The BOJ’s move on Friday comes largely in line with market expectations, as analysts saw little scope for immediate change in the bank’s dovish stance under new Governor Kazuo Ueda.
Equichain Wealth Advisors: Market View & Opinion
While BOJ maintains its ultra-low interest rate and QE policy. If we compare all these policies, we see significant contradiction as all these central banks are key liquidity provide for global financial market.
Our base case assumption does suggest that – we could consider this as early sign of “PIVOT” as higher interest rate will show its impact sooner rather than later.
