In Europe, stocks closed their worst week in two months on Friday, with technology stocks and retailers hurting by selling at the prospect of further interest rate hikes to curb the highest inflation in decades. “We agree with investors that the ECB is likely to raise interest rates by 25 basis points in July”said Jack Allen-Reynolds, chief Europe economist at Capital Economics, warning that the worst is yet to come for the euro zone economy.
The market analyst, Santiago Llullin dialogue with Ámbito, analyzed the rate hike of the United States Federal Reserve: “The Fed needs to raise rates to be able to regulate the economy a bit USAwhich is asking for it. When there is a rise in rates, many of the investments go to a risk-free rate, especially to US Treasury bonds.”
As for the affected sectors, Llull believed that a rise in interest rates “It takes away the possibility of investment from growth companies, such as technology companies, which are the ones that lose the most” and that this investment flow “goes to the financial sector.” “These technology companies also lose because most companies have loans and are in debt and credits also become more expensive. Therefore, what this Fed rate hike does is make technology companies lose capacity and profitability. “analyzed.
Which were the Central Banks that raised rates
The central bank of NorwayNorges Bank, kept interest rates on Thursday, following raising them a quarter point, to 0.75% in March, when it announced plans to tighten the monetary politics faster than anticipated. It plans to raise rates once more in June and raise them to 2.50% by the end of 2023, with three more hikes than previously planned.
The Reserve Bank of New Zealand (RBNZ) is one of the central banks most aggressive in the world. Last month it raised its interest rate 50 basis points to 1.5%, the biggest rise in two decades and the fourth this cycle. With inflation at a 30-year high, markets expect another 50 basis point hike this month: the RBNZ sees rates peaking at 3.35% by the end of 2023.
The Bank of Canada It started its cycle of rate hikes in March and last month raised rates 50 basis points to 1%, its biggest move in more than two decades. You’re also letting maturing bonds roll off your balance. BoC Governor Tiff Macklem sees rates still well below neutral levels, estimated at between 2% and 3%. Markets expect rates to approach 3% by the end of the year, with a further half-point hike on June 1.
The Bank of England on Thursday raised interest rates to 1%, their highest level since 2009, to control inflation, which they forecast will exceed 10% this year. Monetary policymakers also beefed up their talk of the need for further tightening in coming months, to the point that two of the Bank of England’s nine rate-setters called the guidance too strong given the risk of Britain slipping into recession. Markets expect rates to be between 2% and 2.25% by the end of 2022.
The United States Federal Reserve on Wednesday raised its key interest rate by 50 basis points, the biggest jump in 22 years, and markets were relieved that it did not opt for 75 basis points. Still, the Fed said it was prepared for more half-point hikes and plans next month to start drawing down its $9 trillion of assets accumulated during the coronavirus pandemic to help control inflation.
The Reserve Bank of Australia (RBA) on Tuesday raised interest rates 25 basis points to 0.35%, signaling more hikes to come. After insisting for months that rate hikes were a long way off, the RBA has finally joined the rate hike club. The change in monetary policy came following first-quarter consumer inflation data hit a 20-year high of 5.1%.
Core inflation reached 3.7%, above the RBA’s target band for the first time since 2010. Futures prices point to rates reaching 2.5% by the end of 2022 and 3.5% in mid-2023, which would mark the RBA’s most aggressive tightening cycle in modern history.
The Riksbank of Switzerland, which was a latecomer to the battle once morest inflation, last week raised rates 25 basis points to 0.25%, to contain a price rise that is at its highest point since 1991, above 6%. The official interest rate of the Riksbank is now positive for the first time since 2014. In February it had said that rates were not expected to rise until 2024. Now it expects two or three more hikes this year, and more next year to take them on the one%
The Swiss National Bank (SNB) remains firmly in line with monetary policy, despite inflation soaring to 2.4% in March, well above the price stability target of 0% to 2 %. He refused to warn of higher rates, insisting that a strong franc helps protect the economy from inflation.
The Central Bank of Brazil (BCB) increased the reference interest rate this Wednesday. It was one percentage point and rose to 12.75%, according to market consensus. This is the tenth consecutive increase applied by the monetary authority to the Selic rate since it began its escalation in March 2021, following placing it at a historical low of 2% to boost the economy weakened by the pandemic.
The Bank of Japan it is still the dove that stays on the sidelines. Last week he reinforced his commitment to keep rates ultra-low by promising to buy unlimited amounts of bonds to defend a target yield on the debt. This caused the yen to fall to a two-decade low once morest the dollar. Japan’s consumer staple prices rose in March at their fastest pace in more than two years, but the fragile economy means the Bank of Japan is in no rush to tighten monetary policy.
