In line with market expectations, the three most important international central banks meeting last week – the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE) – have embarked on yet another rate hike as part of their ongoing efforts on the timely return of inflation to the medium-term target. However, the changes in the content of the leaders’ official announcements and/or comments in their standard post-meeting press conferences came as a welcome surprise to the markets as they were taken as a sign that their monetary tightening cycle may soon be coming to an end. . . .
The Fed is up 25bp. its intervention rate and reaffirmed its intention of further increases (probably two, according to chairman Jerome Powell) to achieve “a sufficiently restrictive monetary stance” to bring inflation back to its target. However, to the surprise of the markets, he did not try to influence market estimates, which, contrary to the bank’s own estimates, continue to point to a rate cut until the end of the year. The ECB also raised its interest rate by 50 bp, underlining its intention to further increase this rate at its next meeting on 16 March. With the likelihood that this is already heavily discounted as the eurozone economy appears to be more resilient than initial estimates and inflation data show that the structural – in contrast to the main index, which was particularly affected by falling energy prices and which fell in December by third month in a row – remains at an all-time high, as markets waited for clues about the prospects for interest rates after March. However, President Christine Lagarde did not make clear statements about the ECB’s intentions after the first quarter of the year, saying that the bank would revise its monetary policy after another increase in March. A softer-than-expected style was also adopted by the Bank of England, which, although it decided on a new 50 bp hike, removed the word “dynamic” from the relevant wording in its announcement of a future interest rate hike.
* Department of financial analysis and research of international capital markets of Eurobank.
Source: Kathimerini
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