Inflation in the US has been on a downward path for several months. A reassuring trajectory, which has prompted many economists and market operators to count on an imminent pause in the cycle of raising the reference rate of the Powered (Federal Reserve of the United States, the American central bank), and even down in the last months of 2023. Expectations that have largely contributed to supporting the stock market since last autumn.
The recent slowdown in US wage growth has fueled hopes that the Fed will not raise its key rate above the psychological 5% threshold. However, Fed officials in Atlanta and San Francisco have recently made rather “hawkish” remarks (in favor of a tight and restrictive monetary policy) judging that the key Fed rate should be raised above 5%, and this, for “much weather”. .
The rebound in rates will increase the risks of the financial system
Same story from Jamie Dimon, the head of the bank JP Morganwho showed his caution in an interview with Fox business. If the head of the American bank judges that the Powered it may soon take a break of a few months in its key rate-raising cycle, to take the time to see the effects of its tight monetary policy on the economy, it may subsequently have to raise its key rate to almost 6%.
>> Buy and sell your investments (stock market, cryptocurrencies, etc.) at the right time thanks to Momentum, Capital’s investment letter based on technical and financial analyses. Right now: 5 MONTHS FREE on the Momentum newsletter for the next 100 subscribers with the promotional code “SOLDES2023”. Offer valid on annual pass until January 31, 2023.
Indeed, raising the policy rate to 5% may not slow inflation sufficiently, while the peak of wage inflation may still be ahead of us and fiscal stimulus efforts are sizeable (and mostly not yet exhausted ), second Jamie Dimon.
And a rise in the reference rate to 6% would probably be unwelcome by the stock market, due to the foreseeable negative effects on the economy, corporate margins and long-term rates (the rise of which weighed particularly on the valuation shares of technology and growth companies).