It’s a hike – And maybe more

Ipek Ozkardeskaya ipekScope

The Federal Reserve (Fed) delivered a 25bp hike, pointing to above-target inflation, as widely priced in by analysts, and the dot plot – which Kevin Warsh refused to add his own dot to – hinted that there could be one more rate hike before the year ends. Broader expectations are that we could see three more by mid-next year.

Furious to see his new guy hike rates a few months into the job, “lower the interest rates for the United States of America, and fast!” cried Donald Trump. I don’t know if this is scripted theatre or if this is real, but with this, the Fed has probably begun a rate-tightening cycle.

The decision triggered a hawkish market reaction. The US 2-year yield spiked to 4.74%, while the 10-year yield hovered around the 5% mark – but overall, the reaction at the longer end of the yield curve was more contained. And tell Trump that that’s exactly what the Fed wanted and NEEDED to do: ease pressure on the longer end of the curve to keep borrowing costs in check.

Read the full article here.

Author

Ipek Ozkardeskaya

ipekScope

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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