Fed - Central bankers think interest rates are going to stay high for a long time. Not everyone is convinced

How major US stock indexes fared Tuesday, 9/19/2023

Associated Press

23-09-19 20:20

Stocks slipped on Tuesday as investors awaited the Federal Reserve's decision on interest rates. The S&P 500 fell 0.2%, while the Dow and Nasdaq composite both dropped 0.3% and 0.2%, respectively. The uncertainty surrounding the Fed's decision has led to fluctuations in the stock market in recent weeks. Treasury yields rose, with the 10-year yield approaching its highest level since 2007. This has resulted in higher mortgage rates, and a report showed weaker-than-expected homebuilding activity. The Fed's announcement is expected on Wednesday.

How to Borrow Money in a High-Rate World


23-09-20 01:00

The Federal Reserve has raised interest rates to the highest levels in 22 years, making mortgages, car loans and credit-card debt more expensive for consumers, but borrowers still have options in a high-rate world. Loans and new products offer short-term cash infusions at lower rates than credit cards, while some services even provide short-term loans with no interest. However, once fees are factored in, these options might not be much cheaper than a standard credit card, so borrowers should scrutinize the fine print and calculate the annual percentage rate (APR) before taking on any credit.

Fed Debates When to Stop Raising Rates. What to Watch at Wednesday’s Meeting


23-09-20 01:00

The Federal Reserve is expected to hold interest rates steady at its meeting on Wednesday, marking the second time this year that it has not raised rates. The decision comes as the central bank takes more time to study the effects of previous rate increases on the economy and inflation. The Fed is likely to project one more rate increase this year, but there is uncertainty over whether officials will revise their projections for 2024. Fed Chair Jerome Powell's news conference following the meeting will offer important clues about the central bank's outlook and conviction on a final rate rise.

Dollar firm but softens against yen ahead of FOMC


23-09-20 00:47

The US dollar remained steady on Wednesday ahead of the Federal Reserve's rate decision later in the day. The dollar index, which measures the greenback against a basket of rivals, stayed mostly flat at 105.13 as traders awaited the Fed's decision. Markets expect the Fed to keep rates on hold at 5.25% to 5.50%, with attention focused on the central bank's forward guidance. The yen edged higher against the dollar, while the Australian dollar rose after the Reserve Bank of Australia's minutes indicated more interest rate increases to come.

Dollar Rally Is Crushing One of the Most Popular Trades of 2023


23-09-19 23:00

The US dollar has unexpectedly rebounded against virtually every major currency over the past two months, causing investors to unwind trades and officials in China and Japan to protect their currencies. The greenback's resurgence is a result of the US economy's surprising resilience and persistent inflation. The Bloomberg Dollar Spot Index has experienced an eight-week rally since mid-July, pushing it back near this year's highs. The rise in the dollar has caused US companies to brace for a hit to their earnings, and has evoked painful memories of 2022 when the dollar pushed up commodity prices and increased the burden of foreign debts. The dynamics behind the dollar's recent rise are expected to continue, causing analysts to abandon bearish calls on the currency. However, a US downturn could restrain the dollar. Overall, emerging-market nations are expected to bear the brunt of the dollar's rise as it makes imports more expensive, exaggerates inflation pressures, and encourages central banks to hold interest rates high.

US Federal Reserve set to hold rates at 22-year high

Financial Times

23-09-20 04:00

The Federal Reserve is expected to maintain its benchmark interest rate at a 22-year high during its latest meeting but will signal its willingness to further tighten monetary policy. The decision comes as the Fed releases new economic projections, expected to show stronger growth than previously predicted. However, there is uncertainty over whether the Fed will follow through with further tightening, as officials are increasingly focused on downside risks facing the US economy. Concerns include the cooling of the labour market, the resumption of student loan repayments, an autoworker strike, and a potential government shutdown.

Indian shares set to open lower with HDFC, Fed decision in focus


23-09-20 02:59

Indian shares are expected to open weaker on Wednesday, with HDFC Bank in focus after the lender warned of an impact to its asset quality. Investors are also awaiting the key policy decision from the US Federal Reserve. HDFC Bank said its gross non-performing assets are likely to increase following its merger with HDFC. Investors will also be watching stocks with exposure to the Canadian pension fund after India's relationship with Canada soured. Foreign investors sold INR 12.37bn ($148.64m) worth of shares on Monday, while domestic investors bought INR 5.53bn worth of equity.

India rupee, perched near record low, to remain under pressure


23-09-20 02:57

The Indian rupee is expected to remain under pressure as it hovers near a record low, with the focus on crude oil prices and the U.S. Federal Reserve's policy decision. Non-deliverable forwards (NDF) indicate that the rupee will open at around 83.25-83.29 to the U.S. dollar. Traders believe that the rupee is likely to hold a negative tone through the session and there are speculations that the Reserve Bank of India may have intervened in the NDF market to defend the rupee. The Fed is expected to keep the policy rate unchanged, but investors will be looking out for the central bank's interest rate projections for 2023 and 2024.

Fed clarity effectively sends a strong buy signal

Reuters BreakingViews

23-09-21 00:30

US interest rates are expected to remain stable at around 5.5% for the foreseeable future, according to futures data. This stability is expected to encourage companies, consumers, and investors to make decisions and investments, resolving valuation uncertainties and reinvigorating M&A, IPO, and housing activity. The Federal Open Market Committee is expected to hold the benchmark interest rate at its current level, with a 30% chance of a rate hike in November and rates potentially starting to decrease in July next year. The stability of interest rates should help to end financial paralysis and stimulate various sectors of the economy, including real estate and IPOs.

How U.S. Households Got Turned Upside Down by Higher Interest Rates


23-09-21 09:30

Higher interest rates in the US are starting to take a toll on households. While savers can benefit from higher interest rates, those looking to borrow for major purchases such as homes and cars are feeling the impact. Credit card users are also being hit as rates rise along with market interest rates. The Federal Reserve has indicated that it may raise interest rates once more this year, meaning rates are unlikely to decrease in the near future. The housing market has been particularly affected, with high rates locking many Americans out of homeownership.

UK homeowners hope Bank of England avoids another rate hike after inflation falls

Associated Press

23-09-21 09:09

Homeowners in the UK are hoping that the Bank of England will decide not to raise interest rates for the first time in almost two years. This comes after UK inflation unexpectedly fell to 6.7% in August, its lowest level since Russia invaded Ukraine. Prior to the release of the inflation figures, economists predicted that the central bank would increase interest rates to 5.5%. However, now there is uncertainty as to what the bank will do. Even if rates are increased, economists expect the bank to indicate that rates have peaked.

Fed’s hawkish stance spooks investors, though some say peak rates near

The Globe and Mail

23-09-21 08:57

The Federal Reserve's plans to maintain elevated interest rates could continue to weigh on stocks and bonds in the coming months, with the benchmark US Treasury yield already at its highest level since 2007. The central bank left interest rates unchanged on Wednesday but projected a further rate increase by the end of the year, and monetary policy forecasts were kept significantly tighter through 2024 than anticipated. However, some investors doubt the Fed will stick to its hawkish stance, with futures tied to the Fed's policy rate suggesting traders expect the central bank to ease monetary policy next year.

If you don't like inflation, you'll hate deflation


23-09-21 08:00

Economists warn against the dangers of deflation, which is the general decline of prices across the board, as it can have negative effects on the economy. Falling prices encourage consumers and businesses to delay purchases, which reduces the circulation of money in the economy. Companies may also have to cut costs, including wages, or go bankrupt. Deflation can also result in a general market decline, creating a vicious circle of more declines. While many Canadians may want prices to go back to lower levels, economists argue that a slower rate of price increase is a safer option.

UK stocks open lower after Fed's hawkish stance; BoE on watch


23-09-21 07:31

London stocks fell as U.S. Treasury yields increased following the Federal Reserve's indication of sustained elevated interest rates. Investors also awaited the Bank of England's (BoE) monetary policy decision later in the day. The FTSE 100 index was down 0.5%. The BoE is expected to announce whether it will halt its run of interest rate hikes after a surprise fall in August inflation. The pound also hit its lowest levels since April. Industrial miners declined 2%, while mid-cap stocks were down 0.6%. Retailers, however, saw gains, with Next rising 1.9% and JD Sports Fashion climbing nearly 7.7%.

U.S. existing home sales fell in August as tight supply boosted prices

The Globe and Mail

23-09-21 14:15

US existing home sales unexpectedly fell in August, with a 0.7% drop from the previous month. The National Association of Realtors reported that sales fell in the South and West, while rising in the Midwest and remaining unchanged in the Northeast. The decline in sales is likely due to persistently tight supply and rising prices, as well as a recent increase in mortgage rates. The housing market had shown signs of stabilising but is now faltering as mortgage rates continue to rise. The median existing house price increased 3.9% from a year earlier to $407,100. Lawrence Yun, the NAR's chief economist, said that supply needs to double to moderate home price gains.

10-year yields hit 16-year peak as Fed seen higher for longer


23-09-21 13:55

Benchmark 10-year U.S. Treasury yields rose to 16-year highs on Thursday after the Federal Reserve surprised investors by indicating the potential for an additional rate hike and fewer cuts next year. The Fed held interest rates steady and said it may still raise rates one more time this year, with expectations of half a percentage point of rate cuts in 2024. The unexpected hawkish stance caught markets off guard, as many expected the Fed to be more dovish given recent encouraging inflation data. Fed chairman Jerome Powell said that a strong economy with strong job growth will allow the central bank to keep pressure on financial conditions through 2025 at a lower cost to the economy and labor market than in previous inflation battles. Whether the Fed follows through with its hawkish outlook will depend on economic data.

End is in sight for global rate hiking cycle


23-09-21 12:58

Central banks around the world are approaching the end of their rate hiking cycles, with their outlooks diverging. The US Federal Reserve has indicated that it may raise rates again this year, while the Bank of England and the Swiss National Bank have chosen to keep rates unchanged. So far, nine developed economies have raised rates by a combined 3,965 basis points, with Japan being the only holdout.

UK interest rates stay at 5.25% in surprise move by Bank of England

The Independent

23-09-21 12:08

The Bank of England (BoE) has decided to keep interest rates on hold at 5.25%, a move that surprised many economists and investors who were expecting a rate hike. This is the first time since November 2021 that the BoE has not increased rates, after 14 consecutive hikes. The decision comes as inflation fell to 6.7% in August, down from 6.8% in July. The BoE left the door open to future rate rises, saying it will "take the decisions necessary" to return inflation to 2%. Some economists believe this will be the peak of borrowing costs.

Investors riddled with FOMO might be re-entering the US stock market


23-09-21 11:51

Global fund managers increased their exposure to US stocks this month by a record amount, according to Bank of America survey data going back to 1999. September also marked the first month global fund managers have had an outsized allocation in US equities since last August.

Planned debt buybacks not meant for periods of market stress, US Treasury official says


23-09-21 16:54

The US Treasury's planned buyback of its outstanding securities in 2024 is aimed at improving liquidity in the bond market but is unlikely to ease periods of extreme financial stress, said Assistant Secretary for Financial Markets Josh Frost. Unlike the Federal Reserve, which can fund its bond purchases by creating reserves, each dollar of Treasury's buybacks would have to be financed with a dollar of debt issuance, limiting the Treasury's ability to rapidly increase the size of buybacks during times of market stress.