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Monetary policy seems to have reached the interest rate peak in many places

The major central banks, except for the Japanese and Chinese central banks, now seem to have reached the end of the tightening cycle. While the Federal Reserve, the Bank of England as well as the Swiss National Bank have already taken at least a pause, the central banks in Norway and Sweden raised rates again. Japan's central bank, meanwhile, is sticking to its ultra-loose monetary policy and left interest rates unchanged. 

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
Interest rate peak

Japan's central bank kept its monetary policy unchanged, leaving its key interest rate at -0.1% and capping the yield on ten-year Japanese government bonds at zero. Most equity markets in the Asia-Pacific region declined at the end of the week. In Australia, the S&P/ASX 200 lost 1%, leading losses in Asia. Japan's Nikkei 225 fell 0.95% and South Korea's Kospi traded 0.55% lower. Hong Kong's Hang Seng Index fell 0.25%, while mainland Chinese markets were also lower.

In New York, stock prices remained under pressure on Thursday after the Federal Reserve refrained from another interest rate hike the previous day but remained hawkish. The Dow Jones Industrial lost 1.08% and exited Thursday's trading at 34,070.42 points. The market-wide S&P 500 fell 1.64% to 4,330.00 points and on the Nasdaq, indices lost almost 2%. In the bond market, the yield of ten-year US government bonds reached 4.49%, the highest level since 2007. Macroeconomic news were mostly negative yesterday. Thus, the business climate in the industry of the Philadelphia region in September unexpectedly clouded significantly. The Philly Fed index fell from +12.0 to -13.5 points (consensus -1.0).

The Swiss National Bank (SNB) left its key interest rate unchanged at 1.75% after five consecutive rate hikes. The rate hikes have contained inflationary pressures, the central bank said. However, the SNB kept the door open for further monetary tightening. The Swiss franc came under pressure, especially since the ECB had raised interest rates again last week.

Like the SNB and the Fed, the British central bank also held still for the time being and left the key interest rate unchanged at 5.25%. The Bank of England had already raised the interest rate fourteen times since the end of 2021 and financial markets expected a further interest rate step. Currently, the key interest rate is at its highest level since the financial crisis of 2008. The decision in the nine-member Monetary Policy Committee was close: five members voted for stable interest rates.

In contrast to the SNB, the central banks in Sweden and Norway raised key rates once again. Sweden's central bank continued its fight against inflation and raised its key interest rate by 25 basis points to 4.0%. In addition, the Riksbank reiterated the possibility of further interest rate steps. Norway's central bank also remains on a restrictive course. Norges Bank also tightened its key rate by a quarter percentage point to 4.25%.

Corporate news in focus: No relevant company results are due today.

Economic data in focus: UK retail sales August (08:00 a.m.), Spain GDP Q2 (09:00 a.m.), Purchasing Managers' Indices for industry and services (PMI Composite) for September from France (09:15 a.m.), Germany (09:30 a.m.), Eurozone (10:00 a.m.), UK (10:30 a.m.), USA (04.45 p.m.).


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