{"id":2003,"date":"2023-06-22T09:35:50","date_gmt":"2023-06-22T08:35:50","guid":{"rendered":"https:\/\/hcfx.sofyma.com\/?p=2003"},"modified":"2023-06-22T09:35:50","modified_gmt":"2023-06-22T08:35:50","slug":"powells-testimony-and-boe-rate-decision-in-focus","status":"publish","type":"post","link":"https:\/\/hamiltoncourtfx.com\/es\/powells-testimony-and-boe-rate-decision-in-focus\/","title":{"rendered":"Powell’s Testimony and BoE Rate Decision in Focus\u00a0"},"content":{"rendered":"
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Markets Weigh on Powell\u2019s Testimony<\/h2>\n <\/div>\n
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Yesterday the Fed\u2019s chair Jerome Powell indicated that almost all of the FOMC\u2019s policy makers would favour further rate hikes as the central bank tries to bring inflation back down to its 2% target. Powell\u2019s remarks came during his semi-annual Monetary Policy Report to Congress and gives the markets further indication that the Fed are still some way off the end of their tightening cycle. In keeping with what many saw as a hawkish dot plot, Powell signalled that it would be a \u201cpretty good guess\u201d that the Fed would raise rates twice again this year. With the funds rate currently at 5%-5.25%, a further two 25bps hike would bring this up to 5.5%-5.75%. Presently, there is around a 70% chance of a 25bps hike in July.<\/p>\n

During their last monetary policy meeting, the FOMC opted to keep rates unchanged, however rhetoric around the meeting focused on how this resembled a \u2018skip\u2019 rather than a \u2018pause\u2019 in their monetary tightening. Hence, Powell told policy markers that \u201cnow we\u2019re moderating that pace, much as you might do if you were to be driving 75 miles an hour on a highway, then 50 miles an hour on a local highway, then as you get closer to your destination, you try to find that destination \u2014 you slow down even further\u201d.<\/p>\n

Other topics of interest included the US labour market, which Powell argued remained strong. His remarks attempted to soften concerns that tighter monetary conditions would have a severely detrimental impact on US employment. \u00a0For example, Republican Congresswoman Maxine Waters who was formerly the Chair of the House Financial Services Committee warned Powell \u201cagainst any approach in monetary policy that ignores the Fed\u2019s maximum employment mandate and results in a recession with millions of people losing their homes and jobs\u201d. In rebuttal, Powell stated that the US labour market remained historically strong with low unemployment and high participation.<\/p>\n

As markets digested Powell\u2019s comments, investors appeared to interpret them as relatively hawkish which fed into a sell-off of equities with the tech heavy Nasdaq falling 1.2% as the Dow Jones and S&P slid 0.5% and 0.3% respectively.<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n\n

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All Eyes on Threadneedle Street<\/h2>\n <\/div>\n
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At 12noon today, all eyes are on the Bank of England, where the monetary policy committee are under increasing pressure to bring down inflation, given yesterday\u2019s hotter-than-expected data. As we looked at yesterday, headline inflation for May remained unchanged from April\u2019s figure as it came in 30bps above the general market consensus. While the 8.7% print marks a slowdown from the recent peak of 11.1% seen in October, it continues to remain well above the BoE\u2019s 2% target rate, raising bets of interest rates being tighter for longer.<\/p>\n

As such, on the back end of the data, markets upwardly rate hike expectations from the BoE with money markets now pricing in an implied terminal rate of 6% in Q1 2024 and remaining close to this level into Q2. If these expectations are actualised, a benchmark rate of 6% would represent the highest rate since February 2000.<\/p>\n

With the MPC\u2019s decision only hours away, markets have fully priced in a 25bps hike with around a 27% chance of a 50bps hike. This would mark the bank\u2019s 13th consecutive rate hike as borrowing rates climb to their highest level since 2008. As we looked at this week, the rising cost of mortgages are continuing to dominate headlines with the average rate for a two-year fixed mortgage deal increasing above 6%.<\/p>\n

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Norges Bank Poised to Raise by 25bps<\/strong><\/p>\n

Today will see the Norwegian Central Bank make their latest interest rate decision, where they are poised to conduct a 25bps rate hike. On 4\u00a0May, the Norges Bank raised their benchmark policy rate by 25bps to bring it up to 3.25% – its highest level since 2008. A weaking krone has fed into elevated inflation across Norway which coupled with high<\/p>\n <\/div>\n

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wage growth which has fed into headline CPI rising to 6.7% in May up from 6.4% in April. This figure marked the highest reading since comparable records began in 2003 saw markets upwardly revise their rate hike expectations for the Norges Bank.<\/p>\n <\/div>\n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

Fed chair indicates further rate hikes are favourable, pressure on the monetary policy committee, and Norges Bank make interest rate decisions.<\/p>","protected":false},"author":15,"featured_media":2016,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"rp-language":[16],"class_list":["post-2003","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-morning-updates","rp-language-en_gb"],"_links":{"self":[{"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/posts\/2003","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/comments?post=2003"}],"version-history":[{"count":15,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/posts\/2003\/revisions"}],"predecessor-version":[{"id":2019,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/posts\/2003\/revisions\/2019"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/media\/2016"}],"wp:attachment":[{"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/media?parent=2003"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/categories?post=2003"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/tags?post=2003"},{"taxonomy":"rp-language","embeddable":true,"href":"https:\/\/hamiltoncourtfx.com\/es\/wp-json\/wp\/v2\/rp-language?post=2003"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}