Federal Reserve officials need further rate hikes

By: Miguel A. Rodriguez

11:36, 19 August 2022

Yesterday the market analyzed the Fed meeting minutes, which, together with the comments of some officials, such as Daly, didn’t provide any certainty about the central bank’s next decision

Treasury bond yields were unchanged during the session, somewhat below the highs reached on Wednesday. Wall Street indices traded with no clear direction and little change compared to the previous day's close.

Trading volumes fell sharply in a typical summer holiday market without any major economic figures to encourage activity among investors.


Both the Fed minutes and the officials’ statements point to the fact that the next decision of the central bank will be somewhat more moderate, with a rise of 50 bps. This is what the market is touting now. The following choices will depend largely on inflation data, although employment figures and leading indicators of the economy will also have an influence. The Fed seems increasingly concerned that too aggressive hikes could cause a deeper economic slowdown.


In principle, this would be positive for the stock markets. Still, after the last two months and given their technical situation close to critical levels and extreme overbought, the stock indices would need extra incentive to continue with the same rising rate.


What does seem certain is that we will still see somewhat higher interest rates in the United States and that a change in bias is ruled out for next year. As some analysts point out, rates will remain high and unchanged for a while, as Fed official Daly stated. And this impacted the price of the US Dollar, which strengthened against all its peers.


This circumstance is reflected especially in the USD/JPY pair, which is very sensitive to US Dollar interest rates. After a technical correction took it to the support zone of 130.50, it has resumed the upward path and is heading towards the latest highs in the 139.40 area.

GráficoDescripción generada automáticamente


Sources: Bloomberg, Reuters

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.