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Powell: Fed could hike by 50 bps

Fawad Razaqzada Fawad Razaqzada 21/03/2022
Powell: Fed could hike by 50 bps Powell: Fed could hike by 50 bps
Powell: Fed could hike by 50 bps Fawad Razaqzada
Jerome Powell's latest remarks caused a bit of panic as investors realised that the Fed is open to an even more aggressive rate hiking path. Powell noted that – if necessary – the Fed would be open to raising rates by a more aggressive 50-basis points at any of its upcoming meetings.   
  
Powell said:
 
We will take the necessary steps to ensure a return to price stability…In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than [a quarter-point] at a meeting or meetings, we will do so.

Following his comments, the major indices took a quick nosedive while the dollar found support and gold eased off its earlier highs, as yields soared. If it does hike by 50 bps, it would be the first time since May 2000 to do that. The Fed has already signalled a much stronger appetite to combat inflation, indicating a further 6 rate increases in 2022. But judging by Powell’s latest comments and those from some of the Fed officials, there is a good possibility that we may even see a 50 basis point increase in May. Let’s see if there is much appetite for that, and what plans they might have for running down the central bank’s $8.9 trillion balance sheet.

yields

Ukraine-Russia uncertainty continues…

While Powell’s remarks have caused a bit of a sell-off in stocks, this comes on the back of a strong rally last week despite continued uncertainty surrounding the Ukraine and Russia.

On that front, no agreements have been reached yet in negotiations with Ukraine. Ukraine’s president has said his country could never surrender Kyiv, Mariupol or Kharkiv to Russia. Russia says there needs to be significant progress made first before a possible meeting between Putin and Zelensky. Last week, hopes over a possible deal had lifted sentiment in the market. Russia’s negotiator on Friday, for example, said that the two sides were now 'halfway there' on the issue of Ukraine's demilitarization, and that on the issues where their views are most-closely aligned is Ukraine's neutral status and not joining NATO. Let’s see if the gap closes in the days ahead, but it doesn’t look promising.

Still, if you look at the financial markets over the past week or so, it is as if the Ukraine war never happened, or the Fed was not very hawkish. Stock markets roared back higher to close solidly in the black last week. This was the second consecutive weekly positive close for European indices, but the first one for Wall Street and Asia Pacific (APAC) markets. STOXX Europe 600 erased all the losses it had suffered since the invasion of Ukraine began. Risk-sensitive commodity dollars surged higher, while safe-haven Japanese yen and gold slumped. Yen pairs had a wonderful week. Cryptocurrencies traded mostly higher. Crude oil bounced sharply off the lows but still ended lower for the second consecutive week. But that rebound has continued into the new week with Brent reaching $111 and WTI $108 per barrel. Oil prices must be watched closely given ongoing concerns over soaring inflation, as any further sustained pressure will intensify those concerns and potentially have repercussions elsewhere in the financial markets.

Economic data highlights for the rest of the week

In terms of macro data, the highlights include durable goods orders and housing market data. From the UK, we have CPI and retail sales, while in Switzerland, the SNB will be making a “decision” on interest rates. Hint: no rate increases are coming. Another set of key data will be the latest PMI numbers, due on Wednesday from Eurozone.
 
Tuesday 22 March
  • Central bank speech: ECB’s Lagarde, FOMC’ Williams, SNB’s Jordan and MPC’s Cunliffe
Wednesday 23 March
  • UK spring statement and Consumer Price Index (CPI) for February
  • Central bank speech: BoE’s Bailey, FOMC’s Powell and Bullard
Thursday 24 March
  • SNB rate decision
  • Flash PMIs from France, Germany and UK
  • US durable goods orders, jobless claims and flash PMIs
Friday 25 March
  • UK retail sales   
  • German Ifo
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

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Lesego Mthombothi
Market Research Analyst, South Africa

Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
 
 
 

Mahmoud Alkudsi
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Mahmoud Alkudsi
Chief Markets Analyst, MENA

Mahmoud is a market analyst, with over a decade of experience in financial markets. He follows main market movers and tracks their effect on the price chart. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and with his wide experience in providing educational and guidance materials to all levels of traders, he helps them in making informed trading decisions. Before joining ThinkMarkets, Mahmoud was head of market research departments in different reputed financial companies, where he provided market analysis for a variety of asset classes, including FX, equities, indices, and commodity futures. As an experienced market commentator, he was hosted by too many print and broadcast media, including not limited to Sky News Arabia, France 24, Alarabyia, Alsharq-Bloomberg, and CNBC Alarabyia to discuss key risk events their clear impact on the price action. Mahmoud holds a Master of Business Administration (MBA) from Cardiff Metropolitan University of Wales, UK, and speaks Arabic, English, and Spanish.

Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Lesego
Lesego Mthombothi
Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
Mahmoud Alkudsi
Mahmoud Alkudsi
Mahmoud is a market analyst with over a decade of experience in financial markets. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and has experience in providing guidance to all levels of traders.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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