LGT Navigator

Fed keeps option open for further rate hike

The minutes of the last interest rate meeting of the US Federal Reserve (Fed) signalled that the Fed could well consider raising interest rates again, as there were still considerable upside risks to inflation. On Wall Street, an attempt at stabilization failed after the previous day's losses. The view on China continues to cause uncertainty, especially since the rating agency Fitch announced that it is considering a reassessment of the creditworthiness of Chinese government bonds. 

Alessandro Fezzi, LGT
Reading time
5 minutes

The Federal Reserve is leaving the door open for further interest rate hikes. This can be read from the minutes of the last interest rate decision on July 26, published yesterday evening. A further tightening of monetary policy may be necessary to a majority of council members to keep inflation under control. Future steps, however, will depend on the totality of incoming information, the Fed stressed. After the last rate hike, the federal reserve rate is currently standing at 5.25% to 5.50%, its highest level in 22 years.

On the New York Stock Exchange, the Dow Jones Industrial declined 0.52% to 34'765.74 points and the broad S&P 500 fell 0.76% to 4'404.33 points. Intel's stock was the laggard in the Dow, falling 3.6%. The semiconductor company had to cancel the planned billion-dollar acquisition of the Israeli company Tower Semiconductor due to a lack of approvals. On the Nasdaq technology exchange, the Nasdaq 100 index fell 1.07% to 14'876.47 points, its lowest level since late June. Meanwhile, the yield on ten-year US government bonds continues to rise to 4.27%.

Looking at the US economy, the construction sector saw a strong increase in new housing starts in July, up nearly 4% from the previous month. Economists had expected an increase of just 1.1%. On the other hand, housing starts in June had slumped by a 11.7% according to revised data. Building permits presented a weak picture, with a weaker-than-expected decline of 0.1% in July (consensus +1.5%). US industry increased production in July after two consecutive setbacks. On a monthly basis, industrial output in the world's largest economy increased by 1.0% (consensus +0.3%).

In Asia, stock markets extended losses on Thursday after the US central bank's minutes for July showed that inflation concerns persist, which could lead to further rate hikes. Hong Kong's Hang Seng index fell 0.7% and in Tokyo, Japan's Nikkei 225 fell 0.91%. South Korea's Kospi fell 1.38%.

Corporate news in focus: Geberit and Meyer Burger Technology with half-year figures and from the United States Walmart with Q2 figures.

Economic data in focus: Interest rate decision of the Norwegian Central Bank (10:00 CET), Eurozone trade balance June (11:00). From the US initial jobless claims and Philly Fed industrial indicator (14:30) and the leading indicator of the Conference Board July (16:00).


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

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

Contact us