’s 5 Things to Watch in the Markets Next Week

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By Noreen Burke – The Federal Reserve is widely expected to announce its first interest rate hike since 2018 on Wednesday as policymakers try to balance dual threats of inflation, which is hitting a four-decade high, and uncertainty. economic resulting from the war in Ukraine. The Bank of England is expected to raise rates again this week, while central banks in Japan, Turkey and Brazil will also hold policy meetings. The massive commodity rally looks set to continue as equities continue to struggle. Here’s what you need to know to start your week.

  1. Fed rate hike

The Fed has clearly signaled that it intends to raise the interest rate by a quarter of a point following the conclusion of its two-day policy on Wednesday, to combat rising inflation, which is well above the 2% target of the year. Fed.

A broader rate hike of half a percentage point is no longer expected since the Russian invasion of Ukraine skyrocketed commodity prices and triggered great uncertainty in financial markets.

Massive rises in commodities added to pressure on global central banks to tighten monetary policy and curb inflation. But this has raised concerns that higher interest rates will act as a brake on economic growth at a time when price increases are already weighing on consumers.

The Fed will release its updated “dot plot” that tracks interest rate projections, with investors eager to see how the war is affecting monetary policy outlook. Investors will also be looking for guidance on plans for the central bank’s nearly $ 9 trillion balance sheet.

  1. Bank of England

The BOE is expected to do so for the third time since December after Thursday, but officials should opt for an increase of another quarter of a percentage point rather than a move larger than half a point.

BOE Governor Andrew Bailey is expected to signal the arrival of further rate hikes, with officials keen to mitigate the risk of entrenching high inflation.

in the UK it peaked in nearly 30 years in January due to higher energy costs and supply chain bottlenecks.

As with the Fed, investors will be keeping an eye on the bank’s assessment of how the war in Ukraine is affecting the outlook for interest rates.

Prior to the BOE meeting, the UK will release its latest report on Wednesday, with the component likely to be in focus as the cost of living escalates.

  1. commodity rally

The recent massive increase in commodity prices could potentially continue for a long time with a doubt about the war in Ukraine.

The war and ensuing sanctions on Russia have driven oil prices to a 14-year high and prices are close to record highs. Prices for e are close to all-time highs, while a doubling of the price last week forced the London Metals Exchange to re-enter the metal.

US government officials have called on domestic and global producers to increase oil production to offset the supply shock and there is talk of potential additions of supplies from Iran, Venezuela and the UAE.

In the coming week, market watchers will focus their attention on the reports of e.

  1. Actions struggle

The benchmark recorded its second consecutive weekly decline last week, while it fell for the fifth consecutive week as uncertainty over the conflict in Ukraine weighed and attention turned to the next Fed meeting.

Equities have struggled this year as concerns over the Russia-Ukraine crisis exacerbated a sell-off initially fueled by concerns about rising bond yields with the Fed set to tighten monetary policy. The S&P 500 has fallen 11.8% so far in 2022.

“Even though investors have accepted that the Fed will likely start raising rates next week, there is still a lack of clarity about how far and how fast the Fed moves from there,” wrote Lindsey Bell, Chief Markets & Ally’s Money Strategist in a note quoted by Reuters on Friday.

“With the market acting (in the form of volatility) and possibly reducing demand, the Fed may not have to move that fast. However, the pace of inflation will be the key driver of policy changes for the better part of this year. ”

  1. Central banks

The Dovish Bank of Japan is not expected to announce any changes from when its two-day meeting ends on Friday, with inflation still far behind the rest of the world for now.

In emerging markets, Turkey’s central bank is expected to keep its one-week repo rate unchanged on Thursday despite hitting a two-decade high of 54% in February. President Tayyip Erdogan’s unconventional approach to monetary policy favors a more accommodative rather than more restrictive monetary policy to fight inflation.

The Central Bank of Brazil is also meeting on Thursday and is expected to hit 11.75%, in what would be the ninth consecutive increase in an annual inflation rate of 10%.

Russia’s central bank will meet on Friday after already doubling its all-time high of 20% following the invasion of Ukraine, in an effort to offset some of the impact of harsh international sanctions. The Russian stock market will do it again this week.

–Reuters contributed to this report

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