FOMC begins its two-day policy meeting today, and is expected to deliver the third 75-bp hike tomorrow. Activity on Fed funds futures gives more than 80% chance for a 75bp hike this morning, and less than 20% chance for a 100bp hike. Although the probability of a full percentage point hike spiked up to 35% after last week’s disappointing inflation reports, we still believe that the Fed has nothing to gain by surprising the market with a bigger than expected rate hike. The strength of the US dollar is too threatening for the Fed to pull out the bazooka.
Banks will announce their latest decisions
Therefore, a 75bp hike at tomorrow’s announcement has the potential to give some relief to the US dollar and the equity markets, as it would help de-pricing the scenario of 100bp hike. Yet, the size of an eventual relief, or whether we would see a relief or not will also depend on the economic projections and the dot plot.
And the global tightening winds will continue to blow beyond the US this week. The Bank of Japan, Sweden, Norway, Brazil, South Africa, Philippines, Indonesia, Taiwan, Turkey, the Bank of England and the Swiss National Bank will announce their latest decisions throughout this week. Most of these banks are expected to raise their interest rates, and/or sound hawkish in an effort to slow the depreciation of their currencies against the Fed-boosted US dollar.
The Swiss National Bank (SNB) is one of them. We discuss why the SNB should follow the Fed with a 75pp hike, and what would be the impact on the Swiss markets.
Watch the full episode to find out more!
- Market update
- Fed will likely hike by 75bp this month…
- The Swiss National Bank will likely follow!
Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
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