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Fed pauses, but remains hawkish

The Federal Reserve (Fed) has left its key interest rate unchanged at 5.25% to 5.5%, as expected by the majority of the capital markets. However, Fed Chairman Powell indicated that interest rates will remain at a high level for a longer period and that another rate hike can be expected in the current year. In addition, the latest Fed projections indicate that fewer interest rate cuts are to be expected in 2024. As a result, share prices on Wall Street fell. Today, the monetary policy decisions of the Swiss National Bank, the Norwegian and Turkish central banks and the Bank of England will follow.

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
Federal Reserve Monetary Policy
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After raising its key interest rate by a quarter of a percentage point at the end of July, the Fed has now left interest rates unchanged for the time being. Overall, the US central bank's assessment of economic developments in September differed only slightly from that in July. However, the Fed also expects a slightly higher inflation rate this year than three months ago. Inflation is expected to average 3.3% in 2023, 0.1 percentage point lower than in the June forecast. However, core inflation, excluding energy and food prices, is expected to be 3.7%. For 2024, the central bank expects an inflation rate of 2.5%, or a core rate of 2.6%.

On Wall Street, the stock indices closed negative after the Fed's interest rate decision on Wednesday. The Dow Jones Industrial fell 0.22% to 34,440.88 points and the S&P 500 fell 0.94% to 4,402.20 points. On the Nasdaq technology exchange, the indices fell even more sharply by about 1.5%. In turn, the yield for ten-year US government bonds climbed to 4.43%, reaching the highest level since the financial crisis.

Asia-Pacific stock markets slipped across the region. In Tokyo, the Nikkei 225 fell by 1.15%. The focus here is now the interest rate decision of the Bank of Japan. The South Korean Kospi fell by 1.3% and the Kosdaq by 1.8%. In Australia, the S&P/ASX 200 fell by 1.25%, reaching the lowest level this month. Hong Kong's Hang Seng Index lost 1.3%, while mainland Chinese markets also declined. The CSI 300 fell 0.55%.

The Swiss National Bank (SNB) is very likely to raise its key interest rate by another 25 basis points at 09:30 today. Another interest rate decision is also due today in the UK. Despite a decline in inflation (at a high level), the Bank of England is expected to raise interest rates by a further quarter of a percentage point to 5.5%. Meanwhile, the inflation rate in the UK surprisingly declined in August. Over the year, consumer prices rose by 6.7%. In July, the inflation rate had still been 6.8% and analysts had expected an increase to 7.0%. Month-on-month, the cost of living increased by 0.3%.

Corporate news in focus: Next with half-year figures.

Economic data in focus: France business climate September, interest rate decision of the Swiss National Bank (09:30 a.m.), interest rate decision Norwegian central bank (10:00 a.m.), interest rate decision Bank of England (01:00 a.m.), interest rate decision Turkish central bank (01:00 a.m.) and euro zone consumer confidence September (04:00 p.m.). From the US initial jobless claims (weekly), current account Q2 (02:30 p.m.), leading indicator and resales homes August (04:00 p.m.).


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