The Federal Reserve will hike interest rates to as high as 5.1% in 2023 before the central bank ends its fight against runaway inflation, according to its median forecast released Wednesday. The expected “terminal rate” of 5.1% is equivalent to a target range of 5%-5.25%. The forecast is higher than the 4.6% projected by the Fed in September, in other words higher for longer..
Powell: "Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way... we’re not in a sufficiently restrictive policy stance yet"
SNB hikes 50bps as expected, note the small uptick revision to inflation expectations (>1.8% in 2024 and 2.1% in 2025) means one more 50bps hike in 2023 will be needed, probably in march2023. SNB: "we have sold foreign currency in recent months to ensure appropriate monetary conditions."
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Markets :
SPX500 - no drama - yet anyway, but we traded through the trendline on the U.S CPI, failed to really retest yesterday post FOMC and now trading a little softer, keep an eye on same old levels of 3'920 area support vs 4'050 and 4150 bigger resistance - chart update below
USD a little stronger together with the slightly higher terminal rate post FOMC >>> USDJPY - above 137.50JPY and the short USdollars will be tested and wrong.... watch out - chart below (>> you can reverse upside down the chart and have EURUSD..!, below 1.0525-50 area and the EURUSD bulls will struggle !!
Crude steady/off lows, will react to further China reopening news eventually
Bonds, all about the language and the 2023-24 curve, terminal rates etc, overall message is and most likely will be for most ''higher for longer''
Gold, metals back down too, XAGUSD through $22.50 and bulls won't like it
Agreed - Higher for longer.. well worth listening to Steen for 5minutes
German economic institute IFW: -2023 inflation forecast of 5.4% is reduction from previous forecast of 8.7% - sees 2024 German GDP growth of 1.3%.
SNB: Cannot Rule Out Further Rate Hikes To Ensure Price Stability - Prepared To Intervene In FX Markets If Needed - Sees 2022 CPI At 2.9%; 2023 At 2.4%; 2024 At 1.8% - Sees Inflation At 2.1% In Q3 2025 - Inflation Expected To Remain Elevated For Time Being
USDJPY - above 137.50JPY and the short USdollars will be tested
SPX500 - no drama yet, but we traded through the trendline on the U.S CPI, failed to really retest yesterday post FOMC and now trading a little softer, keep an eye on same old levels of 3'920 area support vs 4'050 and 4150 bigger resistance
Have a great end to the week
Team PVM
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