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Interest rate expectations have risen sharply in a very short time after new super-high inflation figures from the US. Financiers are now pricing in more than 90 percent probability that the US Federal Reserve (Fed) will raise the key interest rate by 0.75 percentage points at its interest rate meeting on Wednesday.
It shows market expectation data from the news agency Bloomberg.
In that case, it will mean a triple interest rate hike, and the largest interest rate increase since 1994.
There is also speculation in the market that the Fed may raise interest rates by a full percentage point.
– Reliable signal of recession
Economists at JPMorgan Chase are also expecting a triple interest rate jump. Their chief economist for the USA, Michael Feroli, says in a note that there is a “non-trivial risk” that the interest rate will be raised by 100 basis points, ie one percentage point.
Chief economist Søren Kristensen at Danish Sydbank writes that American shares are now officially in a “bear market”, after falling 20 percent from the top.
– The bond market is also cracking large, as short-term interest rates exceed the long-term ones. It is typically a fairly reliable signal of a recession within 12-18 months, he writes.
Kristensen at Sydbank also believes that the central bank will raise the interest rate by 0.75 percentage points. He is among several who have noted the speculation.
– There is even a lot of talk in the market that the Fed can decide to raise the interest rate by a whole percentage point to show action, he writes.
The chief economist believes that investors will have to look far for help from the central banks. as they got when interest rates were shaved when the pandemic broke out, oil prices collapsed and stock markets crashed. As long as inflation does not fall, he believes central banks are increasingly getting harder and harder in both word and deed.
– Therefore, it should frighten both investors and central banks that on a day like yesterday with large price falls, we still see oil and commodity prices holding their own. This testifies to the fact that rising interest rates have not yet really taken hold in weaker demand. The conclusion is therefore that investors must prepare for the headwind far from over, Kristensen writes.
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Goldman Sachs tracks triple
On Monday night, the financial institution Goldman Sachs revised the interest rate forecasts for the Fed to include interest rate increases of 75 basis points during the upcoming interest rate meeting this week, and a corresponding interest rate increase during the meeting in July.
Investment banks Barclays and Jefferies changed their forecasts to 75 basis points on Friday last week, after inflation figures from May showed higher-than-expected inflation.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other use of all or part of the content may only take place with written permission or as permitted by law. For additional terms look here.
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