Hike rates

Weekly Outlook: US set to hike rates 75 basis points as BoE holds postponed meeting

monday september 19

  • – Rightmove survey of UK house prices
  • – US Homebuilding Industry Survey NAHB
  • – In the United States, the quarterly results of Auto area and Lennar

tuesday september 20

  • – Half-year results of Haleon, Henry Boot, Kingfisher and Anexo
  • – Commercial statements of Three and TUI
  • – Japanese inflation figures
  • – Flash Purchasing Managers Indices (PMI) for Asia, Europe and UK manufacturing and services
  • – New housing permits in the United States
  • – New housing starts in the United States

Wednesday, September 21

  • – Annual results of Galliford Trial and Reit Income Supermarket
  • – Half-year results of Petershill Partners, town pub group and Strix
  • – UK government borrowing figures
  • – German ifo Business Climate Index
  • – Bank of Japan central bank decision on interest rates

Unlike its Western counterparts, the Bank of Japan has not moved from its key rate of -0.1%, a level maintained since the spring of 2016. While inflation in Japan is currently at 2.6%, its highest level since 2014, the BoJ continued an accommodative monetary policy.

However, according to AJ Bell chief investment officer Russ Mold and financial analyst Danni Hewson, the current state of the yen could prompt a change in approach.

“If Japan wanted to stop the fall of its currency, all it had to do was change course on monetary policy and interest rates or reverse [qualitative quantitative easing]but Governor Haruhiko Kuroda seems committed to both negative rates and QQE and is therefore unlikely to back down before stepping down at the end of his second five-year term in spring 2023.”

  • – Sales of existing homes in the United States
  • – US Oil Inventories
  • – Decision of the Federal Open Markets Committee of the United States Federal Reserve

The US Federal Reserve is expected to raise interest rates to their highest level since the first quarter of 2008 as it continues to face higher than expected inflation of 8.5%.

Having already made four rate hikes in 2022, which saw the Fed Funds rate drop from a record high of 0.25% to 2.5%, the market is currently putting a 0% chance on a hike of half a percentage point to 3%, a 72% chance on a three-quarter point rise to 3.25%, and a 28% chance on a full one percentage point rise to 3.5%.

Federal Reserve Chairman Jay Powell is also expected to comment on the Fed’s quantitative tightening program.

Mold and Hewson said: “The Fed’s balance sheet is already slowly shrinking, and this withdrawal of liquidity could be an interesting test for US equities, which appear to have bathed in the dollops of cheap cash that the US central bank has provided. .

“That’s why the debate over the so-called Powell Pivot, and if or when the Fed turns around and starts cutting rates, and even adding QE again, is so important.”

Thursday September 22

  • – Annual results of PZ Cussons, Cineworld, JD Sports Fashion and SVC
  • – Commercial statement of Halma
  • – Bank of England Monetary Policy Committee Meeting – DELAYED

The Bank of England will announce its latest policy decision at a delayed meeting of the monetary policy committee, which was due to take place on September 15 before the death of Queen Elizabeth. The BoE has raised rates six times since last December, currently standing at 1.75% from a low of 0.1%.

Markets are expecting another 75bps hike, with a 65% chance of a 2.5% hike, while there is a 35% chance of a 50bps hike.

Hewson and Mold also expect to find clues about the BoE’s plans for future interest rate changes.

“[Investors] will be looking for any indication of what the Bank of England might do going forward, especially as the Federal Reserve appears determined to maintain tighter monetary policy for longer than markets had begun to expect.

“For now, markets expect the base rate to rise from 2.5% to 3% in November and 3.5% or even 3.75% in December before peaking at 4.5 % next fall. The first interest rate cuts are expected very late in 2023.”

  • – Decision on interest rates of the Swiss National Bank
  • – Weekly US Unemployment Claims
  • – In the United States, the quarterly results of CostCo, Accenture, FedEx and Dard Restaurants

friday september 23

  • – Annual results of group of blacksmiths
  • – Commercial statement of Investec
  • – In Europe, the quarterly results (excluding field) of Juventus