Stock market declines (vecteezy photo)
The Open Market Conference (FOMC) is expected to announce the US interest rate for June tomorrow. The consensus of estimates is an increase of 0.75%, an increase that is already embodied in the markets but New York fears a situation where the interest rate will rise above 0.75%. Morgan will be a real surprise, with JP Morgan estimating that the Federal Reserve is adjusting interest rates to 3.5% to 3.75% by the end of the year.
Recall that the main reason for the aggressive interest rate increase expected tomorrow is the high inflation in the US that not only does not fall or moderate but also rises. Moderated slightly to an annual rate of 8.3%.
More in-
At the moment at least all macro factors support the continued rise in US prices whether it is energy prices that continue to rise so that the price of a barrel of oil has risen above the $ 120 level and the price of a gallon of US fuel has crossed the $ 5 level.
Disruptions in the supply chain continue to drive up prices from the global economy. For example, a few weeks ago, China announced that it was easing traffic restrictions and that it was ready to return China to full capacity in four strokes. It’s just that since then the corona has returned to erupt and it seems that the full removal of restrictions in China is far from over, at least at this point.
A positive statistic is the fact that unemployment in the US is low and stands at 3.5% as the number of employed in the non-agricultural industries is growing and they are raising the average hourly wage and this increases the desire (and ability) of individuals to spend money.
With all this goodness, there is a need to address the inflationary outbreak in the US (and around the world) quickly and after the US data was released it was clear that expectations from the Federal Reserve were much more aggressive and this led to a significant rise in bond yields. The 10-year government cut the 3.4% level after the previous break-even point observed to calm the markets was at the 3.2% level.
It should be borne in mind that raising interest rates in conjunction with reducing the Fed balance sheet could weigh on the performance of the real economy and push it into a recession that is a different kind of trouble. But it is clear today to all that there is a need to cool the American economy (which will cool the whole world with it) and beautiful one hour earlier.
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