EnergyScan

Managing expectations

The latest Fed meeting did not surprise market consensus and implied market rates. Indeed, on many aspects, bond yields and interest rate futures were in sync with the Fed’s assessment of the inflation situation in the US and abroad. In this meeting, Fed members maintained the target rate unchanged. It was decided that the pace of the monthly asset purchases would be slowed down, with a $30B monthly slowdown for the next months. It will reduce treasury bill buying by $20B and $10B for mortgage-backed securities. The key takeaway from their forward guidance, shown in the dot plotis that Fed members foresee a more rapid rise in rates, with three interest rates hike in 2022 instead of two on average. The terminal rate is unchanged, as the US productivity and capital formation dynamics remains strong according to FED members. The market reaction was muted outside of US equities, as most of the policy changes were largely expected. The S&P index still climbed by 80 points after the announcement, likely due to de-hedging strategies.

Fed’s members appropriate median target rate policy

Source: US Federal Reserve

This afternoon, the Bank of England will also meet to decide on their target rate, which should remain unchanged, given how the US Fed meeting was welcomed. The UK inflation remains slightly below the US measurement, which might give the Bank of England extra room for a more dovish approach ahead of 2022. We are also expecting flash PMI indices for December the main EU economies and the US, a good indicator of the Omicron impact on the economy.  

Share this news :
Share on twitter
Share on linkedin
Share on email

You might also read :

ES-oil
November 17, 2021

Stocks dynamics remains mysterious

Global crude stocks are the subject of interest for many market participants lately. Sattelite imagery providers are reporting steep draws since November, especially Kayrros. On the other…
ES-oil
July 23, 2021

As if nothing happened

Brent prompt prices are back to their level of the start of the week: above $73/b. The sharp downward correction on concerns over the Delta variant…
Join EnergyScan

Get more analysis and data with our Premium subscription

Ask for a free trial here

Don’t have an account yet?  Sign up here!

[booked-calendar]