Last June, when inflation in the US broke a 40-year record, the expectation of strong and sharp interest rate hikes led the markets to react accordingly | Last weekend, with the publication of the latest index data, the increase moderated and the expectation of significant interest rate hikes – decreased | The markets reacted accordingly, and the rise in stocks led to the weakening of the dollar globally
Shay Klein 11/13/2022
According to data from the US Department of Labor, the consumer price index increased by 7.7% during the last 12 months – including October – and therefore, inflation in the US returned, in annual terms, to the lowest level since January.
The annual rate of increase (and the data of the last two months has a great significance on the rate), was lower than expected, even if the energy and food indices are deducted from the data, therefore, in the US it was estimated that the Fed would moderate the next interest rate increases.
In response, the dollar immediately weakened by about 1 percent against the world’s leading currencies, as the markets turned back to purchase contracts on the leading indices on Wall Street (which recorded particularly large increases on the weekend).
In fact, it was what was defined as the sharpest swing of the dollar in the last two years.
Economists now estimate that the next interest rate increase, which is expected to occur in mid-December, will reach only 0.5% and not 0.75% as the Fed used to do in recent interest rate increases.
The markets estimate that despite the early expectation of a higher increase, the interest rate will not exceed the 5% mark.
Today the interest rate in the US stands at 4%, but no one has any doubts that further increases were planned in December and after that.
The whole question is how much the Federal Reserve will raise the interest rate. Will he act as he did the last four times (0.75%) or will the numbers be cut in light of the new inflation data.