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Central bankers expect more rate hikes

The heads several of the world’s most important central banks agreed at a conference on Wednesday that tighter monetary policy may be needed for longer than previously expected. The agreement among central bankers - including US Federal Reserve (Fed) Chair Jerome Powell and European Central Bank (ECB) President Christine Lagarde - on the need for higher rates put markets under pressure.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
© Shutterstock

At an event in Sintra, Portugal, Lagarde and Bank of England (BoE) Governor Andrew Bailey both said they expect more interest rate hikes to come and Powell likewise did not rule out the possibility of two more consecutive moves by the Fed. The ECB and BoE continued to hike rates this last month, while the Fed chose to pause its rate hiking cycle to allow some time to observe the effects of its previous monetary policy decisions. A day earlier, strong US new homes sales and soaring consumer confidence suggested the world’s largest economy is holding up despite the Fed’s hawkish stance.

After making gains the day before, US stock markets closed with little change on Wednesday. The Dow Jones Industrial fell by 0.22% percent to 33,852.66 points. The market-wide S&P 500 lost 0.04%, to end at 4376.86 points. The technology-heavy Nasdaq 100 gained 0.12% to end the session at 14,964.58 points. A report from the Wall Street Journal that the US is considering restrictions to exporting chips to China pressured chipmakers on Wednesday. Nvidia closed down 1.81%.

Stock markets in the Asia-Pacific region also struggled to find a clear direction in early Thursday trading. The Shanghai Composite fell 0.1% while Hong Kong's Hang Seng Index lost 1.4%. Australia’s S&P/ASX 200 was essentially flat. Japan’s Nikkei 225 gained 0.5% and South Korea’s Kopsi slipped 0.2%.

In Europe, the forecast for German consumer confidence for July fell after eight straight months of improvement. Consumer confidence fell to -25.4 points in July from -24.4 points in June. Inflation, which is around 6%, is holding back consumers’ purchasing decisions in Europe’s largest economy, according to the GfK Consumer Sentiment Study. Germany's DAX finished Wednesday's session up 0.64%.

Corporate news in focus: Nike Q4 figures.

Economic data in focus: Fed Chair Jerome Powell speaks in dialogue with Bank of Spain Governor Pablo Hernandez in Madrid (08:30 CET), Riksbank interest rate decision (09:30), US GDP (14:30), weekly initial jobless claims (14:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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