Nordean chief analyst Jan from court says the US Federal Reserve Jerome Powellin yesterday’s or Wednesday’s comments eased investor sentiment.
In the long run, however, market and economic sentiment remains uncertain, he said.
“This probably eased a bit of pressure on how easily interest rates would rise. But no certainty has yet been obtained as such, ”von Gerich commented.
He said the inflation situation remains challenging and the Federal Reserve has had to make tougher movements than the central bank had planned.
“Of course, the faster the monetary policy has to be tightened, the greater the risk. From that point of view, this was a small relief. ”
Federal Reserve in an awkward situation
On Wednesday, the Fed raised interest rates by 50 basis points, as expected, from 0.25 to 0.50 per cent to range from 0.75 to 1.0 per cent and announced a balance sheet cut from June. This was the largest one-time increase in the policy rate in 22 years.
Governor of the Central Bank Jerome Powell said in a post-meeting briefing that the central bank is not actively considering an increase of 75 basis points.
Investors have considered an increase of 75 basis points to be very possible.
Following Powell’s comments, the rise in Wall Street stock markets accelerated significantly and interest rates fell sharply.
“But if you think about the big picture, the uncertainty continues. Monetary policy continues to tighten rapidly, and we do not yet know how high interest rates need to be raised to curb inflation, ”says von Gerich.
The US Federal Reserve is in a challenging situation. It should be able to tighten monetary policy so that inflation falls without making the economy “more frosty”.
“The global environment remains challenging. There are problems in China, the war of invasion of Russia continues and at the same time there is a contradictory message about the economy, ”von Gerich sums up.