All articles tagged with #interest rate hike
The Bank of Japan raised its key interest rate to 0.75%, the highest since 1995, to combat persistent inflation, marking a shift from years of near-zero rates, which impacts borrowing costs, currency value, and global markets, amid ongoing economic challenges and a weakening yen.
Japan's central bank has raised its interest rate to 0.75%, the highest in 30 years, in an effort to combat inflation, marking a significant shift after decades of low rates, amidst a global trend of easing monetary policy.
US bond yields rose after New York Fed President John Williams mentioned the possibility of an interest-rate increase, interrupting the market's recovery from earlier highs. Williams clarified that it's not his base case but acknowledged that higher interest rates may be necessary if economic data indicate a need to achieve the Fed's goals.
A Bloomberg survey suggests that Japan's $4 trillion offshore funds are likely to remain unaffected by the Bank of Japan's first interest-rate hike since 2007, with only about 40% of respondents expecting Japanese investors to repatriate foreign assets. This is expected to benefit US stocks and bonds, as yield gaps between Japan and other major economies may remain too wide for Japanese investors to cross.
Bank of Japan board member Hajime Takata hinted at a potential interest rate hike and the end of negative interest rates, leading to a drop in USD/JPY. He emphasized the nearing of the 2% inflation target and the need for a flexible response in monetary policy, including potentially abandoning the yield curve control framework and committing to overshoot on inflation. These comments suggest a bias towards sooner rather than later for rate moves, with market pricing not at 100% until June, and come amid increasing verbal intervention to stem yen selling.
The Reserve Bank of Australia is expected to raise its cash rate by 25 basis points, but there are some analysts who believe it could be a close call. Factors supporting a hold include past complacency by the RBA, the recent inflation increase not being significant enough, and the delayed impact of previous rate hikes on the real economy. However, the majority of analysts predict a rate hike due to the strong Q3 CPI print and the RBA's goal of bringing inflation under control. The RBA's decision will be announced later today.
Stock futures inched higher to begin the final trading week of August, with futures tied to the Dow Jones Industrial Average rising 0.2% and S&P 500 futures and Nasdaq-100 futures adding 0.2% and 0.3% respectively. The market reacted positively to remarks from Federal Reserve Chair Jerome Powell, who highlighted signs of economic growth and strong consumer spending but emphasized the need to proceed cautiously with further interest rate hikes. Traders are currently pricing in a 20% chance of a rate hike at the Fed's upcoming September meeting. The major indices are on track to finish the month with losses, with the Dow and S&P down 3.4% and 4% respectively, and the Nasdaq down 5.3%.
Russia's central bank has implemented a significant interest rate hike in an effort to combat inflation and strengthen the ruble, which has reached its lowest value since the war with Ukraine. The ruble has depreciated by over a third this year due to increased military spending and Western sanctions. While the weaker ruble has allowed Moscow to convert oil revenue into more rubles, the decline has gone too far, prompting the central bank to tighten it up. The rate hike aims to address rising prices and inflation caused by increased demand for imports. Despite challenges, analysts believe that the weaker ruble does not indicate an economic crisis but rather a need for adjustment.
Russian missiles struck two cities in western Ukraine, causing casualties and damage. Three people were killed in Lutsk, while residential buildings were hit in Lviv. In response to the falling ruble, Russia's Central Bank raised the interest rate to 12%. The currency has lost almost a quarter of its value since the invasion of Ukraine. The US ambassador to Russia met with a jailed Wall Street Journal reporter. China's defense minister is set to visit Russia and Belarus, deepening their partnership. More than 20 Russian diplomats have left Moldova amid deteriorating ties. A Russian fighter jet prevented a Norwegian plane from crossing the border. A retired Russian colonel was convicted of discrediting the military. A Chechen battalion continues to fight in Ukraine. Ukrainian President Zelensky visited troops on the front line. The ruble's depreciation is attributed to an uneven trade balance and Western sanctions.
The Bank of England is expected to raise interest rates by a quarter-point, aligning with other central banks, but the challenge of controlling inflation is ongoing, and investors should be prepared for a potentially hawkish outcome.
Oil prices rebounded as traders refocused on signs of supply tightness, with Brent crude trading above $83 per barrel and West Texas Intermediate close to $80 per barrel. Prices had dipped on Wednesday after the Energy Information Administration reported modest draws in crude oil and fuel inventories, and the Federal Reserve announced another interest rate hike. Analysts expect higher prices due to resilient demand, OPEC+ production controls, and a decline in the U.S. rig count. Saudi Arabia may extend voluntary production cuts if prices don't rise substantially.
U.S. Treasury yields rose as investors evaluated the state of the economy and anticipated upcoming data releases and the Federal Reserve's meeting next week. The 10-year Treasury yield increased by 11 basis points to 3.856%, while the 2-year Treasury yield rose by over 8 basis points to 4.839%. Investors are closely monitoring economic indicators, such as existing home sales and weekly initial jobless claims, which could influence the Fed's decision on monetary policy. While an interest rate hike is expected, uncertainty remains for the rest of the year. The recent lower-than-expected consumer inflation reading suggests easing price pressures, but it still exceeds the central bank's target range of 2%.
Global stock markets rose and the dollar rebounded as positive bank earnings and strong retail sales data in the US indicated a resilient economy, reinforcing expectations of an interest rate hike by the Federal Reserve next week. Bank of America reported a 20% surge in second-quarter profit, while Morgan Stanley beat analysts' estimates. Retail sales increased 0.2% last month, with core retail sales rising 0.6%. The dollar index rose, and futures indicated a 97.3% probability of a 25 basis point rate hike. Global stocks gained, with the Dow Jones Industrial Average rising 1.06%. Oil prices also climbed, and gold reached a one-month high.
Strong economic data, including high consumer confidence, positive home prices and new home sales, and growth in durable goods orders, has led economists to be less worried about a recession this year. Consumer sentiment is also reflecting this optimism, with fewer consumers expecting a recession in the next 12 months. However, there are still concerns about inflation, and the Federal Reserve is expected to raise interest rates in July to combat it. The upcoming Personal Consumption Expenditures (PCE) index and June jobs report will provide further insight into the Fed's next moves. Some economists argue that the strong housing market supports the case for additional rate hikes, while others caution against relying too heavily on positive data and inflation remains a concern.
A "basket-case" central bank in a developing country has implemented a significant interest rate hike in an effort to combat inflation and stabilize the economy. The move is seen as a departure from the bank's previous policies and a sign of its commitment to addressing economic challenges.