BoE & SNB Hike Interest Rates

STOCK INDEX FUTURES

Stock index futures are lower as investors digested the latest Federal Reserve decision. Yesterday, the Federal Reserve raised its target interest rate by 75 basis points, which is the most since 1994 and Chair Powell signaled a similar move could come at the July meeting.

Housing starts in May were 1.549 when 1.695 million were expected and permits were 1.695 million, which compares to the anticipated 1.780 million.

Jobless claims in the week  ended June 6  were 229,00 when 220,000 were predicted.

The June Philadelphia Federal Reserve manufacturing index was negative 3.3 when 5.5 was estimated.

CURRENCY FUTURES

The U.S. dollar index is a little lower but remains near the highest level since late 2002.  

Passenger car sales in the EU dropped 11.2% year-on-year to 791,546 units in May of 2022, marking the tenth consecutive month of decline.

The Bank of England raised its main bank rate by 25 basis points to 1.25% during its June 2022 meeting, which is the fifth consecutive rate hike and pushing borrowing costs to the highest level in 13 years.

The Swiss National Bank hiked its policy rate by 50 basis points to -0.25% at its June 2022 meeting, surprising markets that expected the interest rate to be held steady, and did not rule out further rate hikes in coming meetings. It was the first rate increase since 2007 after the central bank kept its policy rate at record lows of -0.75% since 2015.

Australia’s job market remained strong in May with a further 60,600 new jobs added over the month.

INTEREST RATE MARKET FUTURES

The Federal Open Market Committee’s vote to hike rates was 10-1, with Kansas City Fed President Esther George dissenting in favor of a 50 basis point increase.

The central bank has also initiated a program to withdraw stimulus by shrinking its $8.9 trillion asset portfolio through attrition.

Financial futures markets are predicting there is a 76.6% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 23.4% probability that the  rate will increase by 50 basis points at the July meeting.

Currently the Fed’s focus is clearly on inflation, while a slowing economy will be problem for the Fed to deal with later.

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