Global Market – BOE hike rate by 50-bps & US Fed Chair Jerome Powell testimony
This week we will discuss, BOE surprises street by raising interest rate by 50-bps to 5.00% and US Fed chair Jerome Powell in a testimony over 2-days to US Congress indicated further rate hike by 1 or 2 before end of 2023.
BOE raises rates by 50-bps to 5.00% – highest level since 2008.
The nine-member Monetary Policy Committee voted 7-2 for an increase to 5%, the highest level in 15 years and the biggest move since February.
Markets had priced in only a 40% chance of a half-point hike, with most economists anticipating a quarter point.
US Fed chair Jerome Powell – may need one or two more rate hike in 2023
Policymakers feel “it will be appropriate to raise rates again this year, and perhaps twice,” if the economy performs about as expected, even as they’ve been hiked to an appropriately restrictive level, Powell told the Senate Banking Committee Thursday.
Fed officials held rates steady last week after 10 straight increases, giving themselves more time to evaluate how the economy is responding to recent banking stress and higher borrowing costs. The move left the Fed’s benchmark rate steady in a range of 5% to 5.25%.
Equichain Wealth Advisors: Market View & Opinion
Barring BOE decision which hike rate by 50-bps, decision by all other major banks were in-line with market estimate. Last week US Fed “PAUSE” on rake hike, ECB raise rates by 25-bps & BOJ maintain its negative interest rate policy and guidance on JGB remains at -0.50% to 0.50%.
We believe further rate hike could impact global economy, which could be pushed in recession for short period of time and globally central banks are prepared to take pain in near term for long term objective to keep inflation at 2%.