Global Markets Await FOMC Rate Decision Amid High Inflation
Investors have to keep adjusting their sails after US inflation rose to 40-year highs in February. As a result, the Federal Reserve is expected to raise its key interest rate by .25 percent to .50 percent when it meets tomorrow, Wednesday March 16. The assets which may see short-term reactions include the safe-haven USD, spot gold prices and banking stocks.
Spot gold prices have declined off recent highs since last week when high inflation in the US raised expectations of a rate hike and strengthened the USD - which is inversely correlated to gold prices.
Stagflation
Stagflation fears are rising as Europe’s conflict woes darken the outlook for the world’s GDP growth. Annual inflation rates appear to have soared as economies recover slowly from their rapid declines during the most difficult periods of the COVID-19 pandemic.
The Asian markets fell overnight on the news that China has locked down its technology hub Shenzhen due to COVID outbreaks. There is usually a slowdown or complete halt in production during lockdowns and already multinational companies like Apple, Toyota and Volkswagen have been affected, according to media reports.
Spot crude oil prices rose dramatically in the early days of the Ukraine conflict, approaching heights not seen since 2007. China’s recent lockdown has since trimmed the energy demand outlook and crude oil prices are now under pressure and heading downwards at the time of writing.
Trading Blog FAQ
What is the FOMC?
The Federal Open Market Committee is the US central bank, responsible for setting interest rate guidance.
What is stagflation?
Stagflation describes a period of high inflation and low economic growth.
What is an interest rate hike?
The FOMC meets eight times per year to issue guidance on the Federal Funds Rate (FFR). The key rate signals to banks how much they can charge other banks for keeping excess reserves overnight.
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