Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
23 September 2022
Yesterday, investors continued to digest the hawkish tone of the main central banks. The Bank of England and the Swiss National Bank decided yesterday to hike interest rate by 50 bp and 75bp to 2.25% and 0.50%, respectively. In the UK the central bank also decided, unanimously, to gradually reduce the size of its balance sheet.
The US Federal Reserve’s meeting centered the stage in a risk-off session, also spurred by the escalation of Russia’s offensive in Ukraine. As expected, the central bank raised policy interest rates by 75 bp while President Jerome Powell said that interest rates will need to stay in restrictive territory for longer, as shown in the dot plot.
Yesterday financial markets recorded a highly volatile session after Russia announced a plan to hold a referendum in the occupied regions in Ukraine this weekend. Investors also dialed up their expectations of tighter monetary policy from central banks, after the Swedish Riksbank surprised with a 100bp hike.
Investors ended the week trading with a pessimistic tone amid concerns on the economic outlook and tightening monetary policy. On a positive note, the US consumers' inflation expectations survey (University of Michigan) showed the lowest rate since last September, easing concerns that the Fed could hike rates this week by 100bp.
Investors started the week trading with appetite for risk, taking position ahead of the CPI inflation report for August in the US, to be released today. According to the Consensus, CPI inflation is expected to have eased to 8.1% y/y (from 8.5%), which, if confirmed, could reduce some pressure on the Fed for continuing hiking policy rates aggressively.
Investors closed the week trading with a risk-on mode, recovering some of the losses of previous sessions following the hawkish rhetoric by major central banks, including the 75 bp interest rate hike by the ECB and comments by Fed Chairman Jerome Powell, who reiterated the need to act forthrightly on inflation “until the job is done”.
Investors continued to trade with caution in anticipation of further monetary tightening by the Fed, despite ISM service sector survey in August was consistent with very solid growth in Q3. In the euro zone, the surveys anticipate the ECB will hike interest rates by, at least, 50 bp on Thursday.