Written Commentary
STOCK INDEX FUTURES
Yesterday the Federal Open Market Committee hiked its benchmark interest rate for the first time since 2018.
Housing starts in February were 1.769 million when 1.700 million were expected and building permits were 1.859 million when 1.850 million were anticipated.
Jobless claims in the week ended March 12 were 214,000 when 221,000 were estimated.
The March Philadelphia Federal Reserve manufacturing index was 27.4 when 15.0 was predicted.
Industrial production in February was up 0.5% as predicted, and capacity utilization was 77.6%, which compares to the estimated 77.8%.
The dominant influence remains geopolitical tensions.
CURRENCY FUTURES
The euro currency is higher after a European Central Bank governing council member said he doesn’t rule out two interest rate increases in 2022 if forecasts for surging consumer prices shift higher.
The euro zone’s annual rate of inflation rose further in February, beating forecasts and hitting the highest level in history. Consumer prices increased 5.9% on the year in February after a 5.1% rise in January. The figure was revised up from the preliminary estimate of 5.8%. Economists predicted inflation in the euro zone would be 5.8% on the year in February.
The Bank of England raised its key bank rate by 25 basis points to 75 basis points at today’s policy meeting, which was in line with expectations. This is the third consecutive rise in borrowing costs. However, the central bank softened the tone about further policy tightening. The BoE said a further tightening of policy “might be” appropriate in the coming months, while in its February meeting it said that a move was “likely.”
The Japanese yen is lower and remains near a five-year low.
The BoJ, which is scheduled to meet tomorrow, has repeatedly stated that it will keep ultra-easy monetary policies to support the economic recovery and achieve its 2.0% inflation target.
Interest rate differential expectations suggest the Japanese yen will trend lower.
INTEREST RATE MARKET FUTURES
Yesterday the Federal Open Market Committee raised its projections for inflation and signaled six more interest rate hikes this year. In addition, the U.S. central bank cut its GDP estimate for 2022 to a 2.8% expansion from the 4.0% expansion it predicted in December.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it will be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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