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Fed Poised for 11th Consecutive Rate Hike

In July 2021, Powell attempted to assuage markets by maintaining that inflation was merely transitory. Two years later the Fed look set to raise rates by another 25bps to bring borrowing costs to their greatest level since January 2001. With headline inflation easing from recent highs of 9.1% in June 2022 to 3% last month, markets are debating over whether the Fed may have reached their terminal rate after today’s poised hike. As we looked at earlier this week the last policy meeting’s minutes underlined how policy makers foresee further rate hikes down the line, as the central bank tries to bring inflation back down to its 2% target. Given that the Fed previously suggested that the decision to pause in June was unanimous, many economists were surprised to learn in the minutes that some policy markets in fact favoured a 25bps hike, highlighting that hawkish influences likely remain. As such markets are projecting the Fed to raise rates for the 11^th consecutive time to bring rates to the 5.25-5.5% range. As such, all eyes remain on the Fed at 19:00 this evening, as well as the press conference 30 minutes later, where markets will be keen to try to gauge an insight into Powell’s monetary policy stance moving forward.

Rolls-Royce’s Raises Profit Expectations

Rolls-Royce have upgraded their profit forecasts, sending their share price rising by around 15% citing higher volumes of revenues given increased demand for fluing and commercial improvement as reasons for the upward revision. Earlier this morning, the company announced that it was expecting its underlying operating profit to rise to £1.2bn-£1.4bn this year, up from a previous expectation of £0.8bn-£1bn. This beat analysts’ projections of £934mn.

Eariler this year, Tufan Erginbilgic took over as Rolls-Royce’s CEO. The newly appointed CEO, who came from BP and has a background in engineering, stated after just 27 days into the job sated that the performance of the FTSE 100 listed company “is at a level [at which] it cannot continue. Rolls-Royce has not been performing for a long, long time, it has nothing to do with Covid, let’s be very clear. Covid created a crisis, but the issue in hand has nothing to do with it”.

As such Erginbilgic announced that he would start a transformation programme to address some of the primary areas of concern, chiefly efficiency which it is expected will translate to job cuts. This speech came not long after Rolls-Royce cut 9,000 jobs as it searched for cost savings over the pandemic.

Australian Inflation Eases

Australian headline inflation (annualised) has dropped to 6% over Q2, slipping one percentage point from Q1 and missing projections of 6.2%. Today’s inflation print marked the lowest since Q3 last year and also represents the second consecutive quarterly fall. Here, Michelle Marquardt, ABS’ head of prices statistics stated that, “while prices continued to rise for most goods and services, there were some offsetting price falls this quarter including for domestic holiday travel and accommodation and automotive fuel”. According to the RBA, headline inflation is projected to slow their 2-3% target by mid 2025, with the central bank indicating the prospect of further monetary tightening.