The European stock markets are trading practically flat and discount that the body will raise rates by 50 basis points after its meeting on Wednesday
The European stock markets hold their breath while waiting for the decision on monetary policy that the Federal Reserve (Fed) will take this afternoon, with the markets of the Old Continent already closed. Everything indicates that Powell’s men will undertake the 50 basis point rise in interest rates that the market has discounted for weeks, despite the economic slowdown suffered by the world’s leading power in the first three months of the year.
The opening in the markets is practically flat, but the rise of just 0.1% registered by the Ibex-35 is enough for the selective to try the 8,604 points.
All eyes are on the US and, although investors are clear that the fight against inflation will lead the Fed to speed up the withdrawal of stimuli, some voices doubt the intensity of the monetary normalization process. After all, this would be the first time that the institution has raised rates by 50 basis points (compared to the usual 25 points) since 2000, when Alana Greenspan was in charge of the institution.
“Given the heavily hawkish communication and clear balance sheet preferences presented ahead of this meeting, we believe that monetary policy decisions will leave few surprises for market participants,” says Allison Boxer, PIMCO’s US economist.
“Instead, all eyes will be on the direction of the statement and the press conference for any indication of the speed of progress,” the experts add. And it is that, with the Fed’s preferred inflation measure above 5% in the first quarter and a conspicuous absence of mentions of downside risks in its latest speeches, they expect the institution to stay on course for another hike. 50 basis points in June.
On the other hand, investors are also waiting for some clue about the strategy to reduce the enormous balance accumulated in recent years. “In principle, the Fed has already stopped buying bonds in the secondary markets, but continues to reinvest the amount of the maturities of those it holds in its portfolio,” they recall from Link Securities in their daily report.
For this reason, they consider that it is feasible that this Wednesday it will be announced that it will stop doing so. Later, the Fed will begin to sell part of its portfolio, although we believe that it will not begin to do so until official interest rates have not reached the level of “neutrality”, which the Fed places close to 2.4%”, experts say.
Against this background, the dollar maintains its strength against the rest of the currencies and the euro trades at 1.0512 dollars, with a slight drop compared to the previous session. For its part, in the raw materials market, the price of oil resumes its increases, with a barrel of Brent, a reference in Europe, above 106 dollars, while West Texas is around 104 dollars.
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