Stock markets hit by central banks ready to curb euphoria
We have to wait and see. For now, there is no pivot and the established plan for rate hikes remains in place.. This is what the European Central Bank (ECB) and the Federal Reserve (Fed) wanted to make known through the latest statements by their members, namely which caused the stock markets to suddenly slow down and correct. Once again, central bankers had to step in to calm things down, warning investors that the current optimism is overdone.
LAGARDE SETTLE THE CONTROVERSY
Christine LagardeECB President Christine Lagarde used her scheduled address at the World Economic Forum in Davos on Thursday to end the to-and-fro of recent days by confirming that the ECB’s intention was to use funds from the European Central Bank. is to keep raising rates steadily because inflation is “too high”.
“The ECB is determined to get inflation back on track in a timely and efficient manner. we have to stay the course until we’ve been in restrictive territory long enough to reduce it,” he said.
Bloomberg’ reported on Wednesday that the rate hike in February would be 50 basis points, for the March meeting, it would be reduced to 25 basis points.and cited officials who did not wish to be identified.
This information contrasts with the statements of Philip Lanemember of the ECB’s executive board, who, in an interview with the Financial Times published on Tuesday, maintained that it will be necessary to further increase the rates. For its part, Klaas knotgovernor of the Dutch central bank and also a member of the governing council of the ECB, made similar remarks yesterday in Davos. “(The ECB) won’t stop at just one 50 basis point hike, that’s for sure. », Knot told CNBC.
THE FED ALSO CALMS THE ATMOSPHERE
The Federal Reserve is also trying to calm market optimism. St. Louis Fed President, James Bullardagain emphasized that Rates must be greater than 5%. in an interview with the Wall Street Journal on Wednesday. In November, Jerome Powell, the agency’s chairman, also sounded hawkish and warned that the final interest rate will be higher than expected. In December he said that monetary policy “is still not rigorous enough”.
“Central banks are trying to avoid signaling that they are close to the end of the rate hike process. »
Moreover, in the past few hours, two senior Fed officials have repeated that high interest rates are needed to keep pushing up inflation which is showing signs of slowing down, but which is still too fast. “Even with the recent moderation, inflation remains high, and policy will need to be tight enough for some time to ensure that inflation returns to 2% sustainably,” he said on Thursday. vice-president Lael Brainard at an event hosted by the University of Chicago Booth School of Business.
“Central banks are trying to avoid giving signals that they are close to the end of the rate hike process.“Juan José Fernández-Figares, director of analysis at Link Securities, agrees. He points out that, in fact, his members keep making contrary comments and thinks that, when they finally decide to take the plunge, it is possible that the upward trend with which the stock markets started the year could be consolidated.. “We will have to be very attentive to what the main western central banks say in two weeks,” he says. The Fed’s rate meeting will take place on February 31 and 1 and the ECB’s on February 2.
For their part, Bankinter analysts, who had already anticipated that Ms. Lagarde would stick to a tough speech in Davos, believe that profit taking on the stock markets should continue and, moreover, they consider them healthy. . “It would be healthy for the market to slow down.”they say.