Fed and ECB expected to raise rates again this week

Fed and ECB expected to raise rates again this week

The Fed will make its next interest rate decision known on Wednesday. The market is pricing in a near certainty of another 0.25% hike. The European Central Bank is also expected to raise rates by 0.25% this week. Investors will be most interested in what Fed Chairman Jerome Powell and ECB President Christine Lagarde have to say after the announcements.

In the UK last week data showed that inflation fell to a 15-month low. UK CPI fell to 7.9% in June, lower-than-expected but only just. Core CPI (excluding food and energy) came in at 6.9%. The data may take some pressure of the Bank of England although both rates still remain well above the BoE’s target of 2%. The Pound/US Dollar fell back below $1.3 and the yield on the UK 10-year Gilt also declined.

Global Stock markets were generally higher last week although the US tech-heavy Nasdaq index bucked the trend with a small decline.

Investors are hoping that a resilient jobs market in the US will help the world’s most important economy avoid recession. Janet Yellen, US Treasury Secretary, expressed as much herself last week, saying in a Bloomberg interview, “I don’t expect a recession…the most recent inflation data were quite encouraging.”

Over the week energy prices moved higher. OPEC cuts have been lifting the price of oil off its May low and recent increasing tensions between Russia and Ukraine could have a further impact on supply.

UK Market Chart 21st July 2023

US Market Chart 21st July 2023

US Risk Barometer 21st July 2023

Europe Risk Barometer 21st July 2023

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