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Another big central bank rate hike is coming. But how many more after that?

June 12, 2022
Arzu
There is a possibility of further tariff hikes Victory against Jerome Powell and others at the central bank will not be announced in the coming months Widespread inflation Consumer prices, in particular, rose 8.6% year-on-year until May.

In fact, the chances of a three-quarters percentage point hike on Wednesday, albeit somewhat remote, increased following the May CBI report.

“The central bank must show commitment. It cannot appear that they are not confident in getting their hands on this stubborn and stable inflation. The next two meetings should be half-point hikes,” Todd Lowenstein said. Leading role strategist of a private bank in Union Bank.

But Lowenstein acknowledged that there was growing debate later this year about whether the central bank should slow down rate hikes or suspend meetings to assess the impact of higher rates on the broader economy. There is a lag between the announcement of higher rates and the fact that they actually slow down consumer spending.

Of course, the pause seems to be low after the hot inflation report for May. Honestly, Merchants are now setting prices More than 40% chance of a three-quarter point hike at the central bank’s July meeting. Economists at Barclays wrote on Friday that it was “a close call” whether the central bank would raise rates to that level in June or July.

However, not everyone thinks the central bank should be so aggressive. The central bank has begun a process known as austerity, which will reduce consumer demand by raising long-term interest rates.

Here’s how it works: As part of the central bank’s 2020 Govt. The so-called easing of this amount has pushed the central bank’s balance sheet to nearly $ 9 trillion.

Now, there is the central bank Extraction of some of these assets By allowing the securities in its balance sheet to mature and not to reinvest the original payments in those securities. This, in theory, should increase long-term yields. This may be another reason why fears of several large rate hikes from the central bank have been exaggerated.

“Size tightness is definitely going to raise long-term rates and I don’t think that’s a market factor. Investors can expect an excessive hawk Federer,” said Sandy Villere III, portfolio manager for St. Denis Javin. Wheeler & Co. “The market is exaggerated, which gives us opportunities to buy certain goods.”

Wheeler said securities and some small-scale U.S. companies are attractive. But he acknowledged that investors should be cautious. There is no guarantee that the central bank will slow the economy without causing a recession.

“We’ll see if the Fed can pull off this magic trick and make a smooth landing instead of a crash landing. There is no doubt that the Fed has been waiting a long time for the central bank to react to inflation,” Wheeler said.

Others worry that the central bank’s rate hikes are not going to help reduce inflation, especially as a large part of higher prices are rising energy costs. If the central bank can not somehow reach a peace agreement between Russia and Ukraine, good luck to see anything Bumble relief Very soon.

“We are confident that we have reached peak inflation,” said Jay Woods, chief market strategist at DriveWealth. “But the central bank is not controlling oil and gas prices. Consumer spending habits are changing drastically.”

Technical canaries in the coal mine?

Technology stocks A brutal year. The Nasdaq The bear is in the market as investors worry about the impact of higher rates Profit from Silicon Valley.
Are the fears justified? Investors will feel better after two great software companies – Oracle (ORCL) And Adobe (ADBE) – Earnings report for this week.

Both companies have great exposure to corporate America. Oracle is at the forefront of database and customer relationship management software, while Adobe’s creative tools (such as Photoshop, Acrobat and InDesign) are being used by forces of business graphics designers.

Shares of Oracle and Adobe, like other technologies, both fell this year. Oracle’s share fell nearly 25%, while Adobe’s fell more than 30%.

Investors will pay close attention to what each company has to say about its outlook for corporate technology spending over the next few months and beyond. How can other cloud software giants give extra clues to Wall Street Microsoft (MSFT), Google (Google), SAP (SAP) And Amazon (AMZN)Doing.
Another cloud leader, Dow Component Sales force (CRM), Recently reported strong earnings. But the company Lowered its perspective He also said he plans to “measure” more about hiring in the future.

Next

Monday: Revenue from Oracle

Tuesday: US Manufacturer Prices

Wednesday: US Retail; Federal Reserve Policy Statement

Thursday: US Homes Launch and Building Permit; US weekly unemployment claims; Revenue from Groger (K.R.), Jabil (JBL) And Adobe

Friday: American industrial production

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