Interest Rate Decisions by the Fed, ECB, And BoE: What You Need to Know

By: Miguel A. Rodriguez

10:32, 31 January 2023

Federal Reserve

Investors are keeping an eye on central bank rate decisions from the Federal Reserve, Bank of England and European Central Bank. Central banks may influence the market, with the FED increasing rates by 25 basis points and the ECB and BOE raising them by 50 basis points. 

The US stock markets opened lower due to profit-taking ahead of a week packed with data and events that will have a significant impact on the markets.  

The Federal Reserve, the European Central Bank and the Bank of England will announce interest rate decisions in the coming days, as will the fourth-quarter earnings of the largest technology companies, including Apple (AAPL), Alphabet (GOOG) and Amazon (AMZN), the most capitalized of the North American indices. 

The USA500 fell, dragged down by the Technology and Communication Services sectors. Tech100, technology index Nasdaq, fell by nearly 2%. Meanwhile, Treasury yields rose slightly, with the benchmark 10-year rate hovering around 3.55%. 

Related: Dow Jones analysis and price predictions 

Investors will also be watching interest rate decisions from the Federal Reserve, as well as its counterparts in London and Frankfurt. The decisions of these central banks are widely taken into account in the market, with the Federal Reserve (FED) slowing the pace with an increase of only 25 basis points and both the European Central Bank (ECB) and the Bank of England (BOE) raising benchmark interest rates by 50 basis points.  

As usual, the important element in these cases will be the post-meeting statement from the central banks which will help determine whether it is more or less restrictive in terms of policy. 

Powell is expected to announce additional rate hikes until inflation begins to slow further. There is still some considerable concern that the labor market remains overly tight, so investors will be watching economic events such as Nonfarm Payrolls report, due on Friday. 

In Europe, the worrying inflation figures remain higher than those of the United States. Yesterday the core CPI figure for Spain was published, which shot up to 7.5%, so the ECB will have to continue adjusting interest rates upwards for a longer period of time despite the fact that the economy begins to show clear signs of contraction, as was the case with the German GDP that was released yesterday showing a fall of -0.2% in the last quarter of 2022. 

Yesterday, global stock markets were pushed down due to the intensification of geopolitical tension, such as the attacks on military installations in Iran and the delivery of offensive war material to Ukraine by NATO countries. Consequently, the US Dollar Index strengthened slightly as a safe haven, so yesterday's movement can be considered a technical correction. 

The EUR/USD is still in a bullish channel, with the bottom around 1.0840. 

Related: EurUsd analysis and price predictions 

Sources: Bloomberg, Reuters 

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This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.