US futures are making some progress towards recouping the losses they sustained the previous day, but investors are still in the process of processing what was communicated by the Chairman of the Fed and the Secretary of the US Treasury.
The Federal Reserve raised interest rates in accordance with the projections of the market; yet, they gave a lot of lip service to the significance of maintaining price stability and how distant the objective is as compared to the actual inflation figure. Several market participants were left bewildered as a result of this development since they had anticipated the Federal Reserve to pay greater attention to the ongoing banking crisis and to admit unequivocally that they intend to address the problem. Another cause that pushed traders into a state of uncertainty over their portfolios was the contradictory message that came from both Jerome Powell, Chairman of the Federal Reserve, and Janet Yellen, Secretary of the United States Treasury.
In a nutshell, there was a complete absence of coherence since one of the parties said that depositors should expect that their money is completely secure, but the other party failed to provide insurance for all of the cash deposited by depositors.
From this point forward, what is going to be important is how the market is going to form its ultimate impression of the Fed decision, as well as whether or not politicians give more assistance for the banks in order to alleviate the lingering worries. We feel that the Federal Reserve made a decision that was quite dovish, and this is particularly true when we compare their decision to Jerome Powell’s comments a few weeks ago regarding the compelling need for higher prices of interest rate rises.
Since it seems that the Federal Reserve’s next action is going to be a halt in the process of increasing interest rates, we think that investors should be less worried about the Fed’s monetary policy. This is because it appears that the Fed’s next move is going to be a pause. This may happen as soon as their next meeting, and taking a look at the Fed’s fund rate and Fed’s terminal rate, the chances have begun to build up for this scenario. This could happen as soon as their next meeting.
As of right now, the primary attention in the UK will be on the monetary policy of the BOE, and the governor of the bank will be subjected to a great deal of questions about some of the most challenging circumstances that the nation is now experiencing. Yesterday, we saw inflation statistics go upward, which was a bit of a surprise for market participants since not many had priced that scenario given the reduction in energy prices and gasoline prices. Furthermore, the drop in energy prices and fuel prices had not been priced into the market.
We think that today, just like the Fed, the BOE will be hiking the interest rate for the very last time, and we do not anticipate any other increases in interest rates in the future months or even quarters. In the months ahead, inflation will naturally begin to decline, and the policy of the BOE will have an impact on the price stability equation.
The British pound has gained a lot of steam over the past few days, and traders believe that this is primarily due to the fact that the dollar index has been performing poorly, as well as the fact that they believe more pressure will remain on the Bank of England (BOE) to do more in terms of increasing interest rates.
