Yesterday, the FED raised the interest rate by 75bps as expected and forecast for the end of year updated %4.4. FED chair Powell said there is no painless way to get inflation down. According to projections, the benchmark interest rate would reach %4.6 in 2023, speeding up its fight against surging prices. The dot plot shows that 10 out of 19 members look for the policy rate to end above %4.25 and a year later they expect policy rate to end of 2023 above %4.5. In addition, median estimate of real GDP for 2022 is harshly updated from %1.7 YoY to %0.2YoY while that of 2023 is also downgraded to %1.2 from %1.7. Fears of recession gives way to the US Index strength. US Treasuries’ yield continue to rise and the spread between 2-10Y treasury yield reached -52bps.
After the FED, today is BoE. The bank will announce a 50bps rate increase today, but some economists predict 75bps move which would be the biggest since 1989. What is more, Swiss official will hike the policy rate into positive territory if they increase at least 25bps. In fact, the market is already priced a 75bps rate hike. With the decision, Europe’s subzero rate period come to end.
This morning, Dollar Index (DXY) rose to 111.750 level. The real rate for 10Y in US reached 117bps. After FED meeting, risk appetite in the market turns negative. European stocks market starts the day with a negative sentiment following FED implied its third consecutive 75bps rate hike and signaled more increases until inflation slow down.