2023-06-08 04:05:00
The Bank of Canada reminded U.S. investors once more on Wednesday that pressing the “pause button” on rate hikes does not necessarily mean the monetary tightening cycle is over.
The Bank of Canada reminded U.S. investors once more on Wednesday that pressing the “pause button” on rate hikes does not necessarily mean the monetary tightening cycle is over.
The Bank of Canada raised interest rates by 25 basis points on the day, somewhat surprising traders and ending a four-month hold. Factors convincing the central bank to raise rates include a rise in Canadian inflation data for April and still-strong consumer spending. The Reserve Bank of Australia raised interest rates for the second time in a row following a brief pause on Tuesday.
This complicates the situation for U.S. investors; they typically take a bullish view on markets until the Fed pauses, historically, Louis Navellier, founder of Navellier & Associates, said in a research note. Depending on the situation, a pause in rate hikes by the Fed is usually accompanied by a rise in the stock market.
Even in the face of a slowdown, Australia and Canada have raised interest rates because of stubborn inflation trends because stagflation is considered worse than hitting inflation by suffering a recession, he wrote. “Our Fed is likely to come to the same conclusion, estimating that a rate level of 6% may be needed to slow inflation enough to actually reach 2%,” Navellier wrote.
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The Bank of Canada reminded U.S. investors once more on Wednesday that pressing the “pause button” on rate hikes does not necessarily mean the monetary tightening cycle is over.
The Bank of Canada raised interest rates by 25 basis points on the day, somewhat surprising traders and ending a four-month hold. Factors convincing the central bank to raise rates include a rise in Canadian inflation data for April and still-strong consumer spending. The Reserve Bank of Australia raised interest rates for the second time in a row following a brief pause on Tuesday.
This complicates the situation for U.S. investors; they typically take a bullish view on markets until the Fed pauses, historically, Louis Navellier, founder of Navellier & Associates, said in a research note. Depending on the situation, a pause in rate hikes by the Fed is usually accompanied by a rise in the stock market.
Even in the face of a slowdown, Australia and Canada have raised interest rates because of stubborn inflation trends because stagflation is considered worse than hitting inflation by suffering a recession, he wrote. “Our Fed is likely to come to the same conclusion, estimating that a rate level of 6% may be needed to slow inflation enough to actually reach 2%,” Navellier wrote.
Investors expect the Fed to pause rate hikes next week, with policymakers keeping the federal funds rate on hold. Starting in March 2022, the Federal Reserve has raised the federal funds rate from close to zero all the way to the range of 5% to 5.25% through a series of interest rate hikes.
Jeffrey Kleintop, chief global investment strategist at Charles Schwab Corp. (SCHW), tweeted following the BoC’s decision: “Interpret the dot plot and officials’ comments all you want, but if the data suggests action needs to be taken.” act, central bankers will change their position and ignore everything they have said.”
(This article is translated from MarketWatch. MarketWatch is operated by Dow Jones, the parent company of The Wall Street Journal, but MarketWatch is independent of Dow Jones Newswires and The Wall Street Journal.)
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