FTSE 100 Live: Markets bet on big Fed rates rise, Bank of England meets

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Financial markets are on standby after the US Federal Reserve raised interest rates to 0.75%, the biggest move since 1994.

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The Fed has made aggressive hikes tonight in recent days after US inflation jumped to a 40-year record 8.6%.

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The Bank of England’s monetary policy committee, which begins its two-day meeting today, is under pressure to increase rates by 0.5%. Traders took note of the central bank’s latest moves as the pound weakened below $1.20 last night.

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Traders ready for big hike in US rates

Rate hike expectations for tonight’s US Federal Reserve meeting have risen from 0.5% to 0.75%, much higher than forecast, after Friday’s inflation reading hit a 40-year high of 8.6%.

According to CME’s FedWatch tool, markets are betting on a 94% chance of a 0.75% move. The Fed’s increasingly aggressive stance on inflation has boosted the US dollar and left the pound trading below $1.20 against the greenback last night.

Michael Hewson, chief market analyst at CMC Markets, said: “The reality is that central banks are so behind the curve that they can’t see the curve. That said, that doesn’t mean a 75 basis point increase today is a good idea.” Is.

“Not because it comes so late in the day, especially given the consistent guidance for 50 basis points over the past few weeks, and gives the impression of a Fed that is losing control of events and a certain Panic about the path of inflation.

Hewson said it was important for Fed policymakers to pay attention to yesterday’s producer price index release, which shows inflation is already slowing as core prices hit their lowest level since November at 8.3 percent.

If the Fed raises 0.75% tonight, the Bank of England will be under additional pressure to raise interest rates by 0.5% tomorrow.

Ahead of the Fed meeting, IG Index has forecast the FTSE 100 index to open up 0.7% at 7240. The S&P 500 fell another 0.4% last night, marking its fifth straight decline as investors worry that higher interest rates will spark a global recession.

European futures markets rose this morning after reports emerged of an unscheduled meeting of the European Central Bank Governing Council today.

Credit: www.standard.co.uk /

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