Fed Chairman Jerome Powell made it clear once again that the massive monetary support for the economy due to the pandemic must now come to an end and that monetary policy must counter high inflation. The Federal Reserve's Monetary Policy Council (FOMC) concludes that the economic recovery and the labor market now warrant a tighter stance. When the bond-buying program expires in March, the Fed is likely to initiate the turnaround in interest rates with a first rate move of at least 25 basis points on the regular rate decision on March 16. The Fed Chairman did not rule out the possibility that key interest rates could rise even more than currently anticipated. According to Powell, there is a possibility that an interest rate step could follow at each regular FOMC meeting this year – a total of seven interest rate decisions are due in 2022. The capital markets are currently expecting "only" four interest rate hikes by a total of one percentage point. In the further course of normalization, the central bank balance sheet is then also to be reduced. Since the term of the purchased bonds is relatively short, the reduction of the balance sheet total will take place quickly, according to Powell.
On Wall Street, stock indices reacted to Powell's statements in the last hour of trading with declines. After initial gains of around one and a half percent, the Dow Jones and the broad S&P 500 closed in the red shortly before the close of trading, albeit only moderately. On the Nasdaq technology exchange, the indices were able to stay just above water thanks to a good quarterly result from Microsoft or Intel. On the bond market, the yield on ten-year US government bonds reached 1.86% and two-year US Treasuries rose to 1.16%. The US dollar strengthened against the euro. With great excitement today, especially the quarterly figures from Apple.
The Canadian central bank left its key interest rate unchanged at +0.25% despite high inflation. Most of the market had expected this. On the other hand, the Bank of Canada held out the prospect of an interest rate hike at its next meeting on March 2 – similar to the US central bank.
The minutes of the Bank of Japan's latest monetary policy decision showed that some council members expect consumer inflation to accelerate briefly toward the central bank's two percent target. The inflation rate could temporarily reach a level of around 1.5% in the first half of the year. However, whether this momentum is sustainable enough to bring inflation stably closer to the central bank's two percent target would depend on wage and inflation expectations. Most of the top committee stressed the need to maintain ultra-loose monetary policy to support the fragile economy. On the January 18 interest rate decision, the central bank raised its inflation forecast slightly, but said there was no rush to adjust the ultra-loose monetary policy as inflation was still far from its target.
The German government in Berlin has lowered its growth forecast for the current year. The annual economic report now projects GDP growth of +3.6% in 2022 compared with +4.1% in the fall forecast. In the first quarter, economic performance is still expected to be impacted by the pandemic and restrictions, especially in services. Over the year, however, the economic recovery should accelerate visibly, said Economics Minister Robert Habeck.
|08:00||GE||GfK Consumer Climate (February)||-6.8|
|10:00||AUT||PMI Manufacturing (January)||58.7|
|14:30||US||GDP Q4 (annualized, q/q)||+2.3%|
|14:30||US||Initial Jobless Claims (weekly)||286,000|
|14:30||US||Durable Goods Orders (December, m/m)||+2.6%|
|16:00||US||Pending Home Sales (December, m/m)||-2.2%|
|UK||Anglo American||Q4 Sales|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.