Ofer Klein, head of the research department at Harel Finance and Insurance, publishes a review in preparation for interest rate increases in the next day around the world.
Klein points out that there is an expectation of a moderation in the rate of inflation, But it will still continue to rise, which will lead to a further increase in the monetary interest rate.
USA – tonight the interest rate will increase by 0.5%
After 4 consecutive increases of 0.75 percentage point, Klein says, the estimate is that the central bank will raise the interest rate by half a percentage point tonight to 4.25%-4.5%. Investors’ focus will be on the updated forecasts for interest rates going forward, where the expectation is that the interest rate will reach 5% in the first quarter of 2023 and remain there unchanged throughout the next year. The main figure that will affect the continuation of the interest rate path is inflation, so the consumer price index data will be a significant weight in the decision.
According to Klein, in October the index surprisingly dropped significantly downwards and contributed to a sharp rise in the stock markets. The November index published yesterday also showed a large drop from early forecasts.
Klein believes that in 2023 we will see more bankruptcies and a higher unemployment rate in light of the slowdown in the real economy, so that wages will rise less and may even decrease, which will cause the inflation that is the Fed’s goal to decrease.
If you want to specialize in the capital market and have a big head and motivation, you can be a good fit for us.
The job can be part-time; flexibility in working hours; Work from home too.
Preference (not mandatory) for writing experience and basic familiarity with the capital market.
Leave details and we will get back to you
Thank you for leaving details, we will try to get back to you as soon as possible
According to Klein, in the second half of 2023 we are headed for a mild recession as part of the economic cycle, at the end of which the economy will emerge stronger after companies without an economic horizon go bankrupt.
As for the capital markets, Klein emphasizes that it is difficult to predict what will happen since they are built more on expectation and hope and if there is a horizon that shows that the exit from the mild recession will be quick – the markets can rise.
Europe – 0.5% or 0.75%
Europe, which had poor opening conditions from the beginning, is suffering from the war in Ukraine mainly around energy prices. To illustrate, the electricity bill in Germany jumped 5 times from last year – which causes an acceleration in inflation.
According to Klein, the European Central Bank is expected to raise the interest rate tomorrow between 0.5 (with a higher probability) and 0.75 percentage points, at the same time as publishing updated forecasts for growth and inflation. Most forecasts support an increase of half a percent mainly against the background of the weakness in the retail sales data for October which decreased by 3% compared to the corresponding period a year ago alongside the decrease in inflation in November and the expectation of continued moderation. On the other hand, the low unemployment rate, the high core inflation and the surveys that do not indicate a significant slowdown support a third consecutive increase of 0.75 percentage point.
In the UK, says Klein, the Bank of Great Britain is expected to raise interest rates by half a percentage point, but the notable differences between the members of the Bank’s Monetary Committee could bias the decision and create a surprise. There are voices in the bank calling for a more moderate increase in light of the increasing signs that the economy is entering a recession, the drop in apartment prices and the forecast for inflation to drop. On the other hand, there are those who support a higher increase in light of the high inflation alongside the tight labor market and the low unemployment rate.
Comments to the article(0):
Your response has been received and will be published subject to system policy.
Thanks.
for a new comment
Your response was not sent due to a communication problem, please try again.
Return to comment