USD: Fed makes quarter-point move toward further taming inflation; EUR: Falling oil prices aren't reflecting in energy producer's prices in the short run; ZAR: 50-basis point hike on interest rates makes Rand economy's cost of borrowing the highest in 14 years; GBP: Double-digit inflation figures once again, consumer confidence still bullish; JPY: No monetary policy moves just yet albeit rising CPI
USD: FED MAKES QUARTER-POINT MOVE TO TAME INFLATION
Despite the global banking uncertainty, the US Federal Reserve announced the highest rate hike since 2007, 4.75%-5%, while indicating it would pause further rate hikes.
US equities initially rose before flipping into negative territory as Chairman Jerome Powell dismissed suggestions of rate cuts this year. The yield on the two-year Treasury bill dropped as a result.
The official outlook for this year predicts slower-than-normal growth and higher inflation. Growth will slow to 0.4% and CPI will hover around 3.6%.
EUR: DESPITE FALLING OIL PRICES, GERMANY'S PPI NUMBERS RISE
Germany's producer prices spiked more than expected for the fifth month in a row, suggesting that inflation may be on the decline in the bloc's biggest economy. In comparison to the same month last year, industrial product producers' prices rose 15.8%, surpassing expectations of 14.5%.
Apart from energy costs, which rose 27.6% year-on-year, producer prices rose on the back of price increases on consumer goods, intermediate goods, consumer durables, and capital goods. As they do not include relief measures on gas and electricity bills that will be paid out in March, these figures are expected to be revised.
Following the release of market data, EUR/USD rose to 1.06811 before dropping to 1.06418. However, investors are on high alert after Credit Suisse Group AG's close call.
ZAR: 50-BASIS POINT HIKE TO 14-YEAR HIGH RATE
SARB's Monetary Policy Committee (MPC) hiked interest rates by 50 basis points on Thursday, raising borrowing costs to their highest level in nearly 14 years. As a result, the SARB's benchmark lending rate rose from 7.25% to 7.75%, raising the prime lending rate from 10.75% to 11.25%.
In the nine months since policy normalisation began in November 2021, the interest rate has increased by 425 basis points, bringing borrowing costs to their highest level since May 2009.
According to SARB Governor Lesetja Kganyago, guiding inflation back towards the midpoint of the 3-6% target band can reduce the economic costs of high inflation and enable lower interest rates in the future.
GBP: DOUBLE DIGIT INFLATION ONCE AGAIN
The British Consumer Price Index (CPI) rose by 10.4% in the 12 months to February 2023, up from the already alarming 10.1% in January. This unexpected acceleration strengthens the case for another interest rate hike, despite shaky sentiment in the commercial banking sector.
The BoE is caught between balancing the cost of borrowing to dampen inflation or hanging fire amid ongoing fallout from US bank collapse and UBS acquisition of embattled Swiss giant Credit Suisse.
The latest data on Wednesday pointed to a sharp slowdown in inflation next year, to 2.9%, preventing a recession.
JPY: A SURPRISE TURN IN CPI IN SPITE OF COST PRESSURES
In February, Japan's consumer prices rose 3.1% from a year earlier, slowing from a 40-year high. However, the continued price pressures and the bigger-than-expected wage increases in large companies have overshadowed the central bank's forecast that inflation is not driven by underlying consumer demand and will slow as the cost of imported commodities falls.
As a result, the market expects the BoJ to stick to its initial strategy of combating inflation. It has no reason to adjust its monetary policies just yet.
AUS: RBA ENTERTAINING "HIKE PAUSE" SUGGESTIONS
RBA's monetary policy decision next month will be influenced by the wobbly global financial sector, along with other major economies' central banks. In the past year, the RBA has increased official interest rates at a record rate, however, as the US central bank raised its rate by 0.25%, the Australian central bank has indicated it might follow suit to prevent an upheaval in the banking industry.
Meanwhile, the RBA is likely to maintain high interest rates and tighten monetary policy given still-strong employment and price pressures. This has resulted in a troubled sentiment in the AUD and indecision among investors.
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