Tassi di interesse della banca centrale

Markets under pressure after Fed minutes. Rate cuts increasingly uncertain

Fed minutes offer little clarification on rate cuts and markets slide into the red.
Asian shares ended the session in the red and the dollar neared three-week highs as traders postponed bets on impending sharp rate cuts this year.
Wall Street closed a disappointing session overnight, with all three main indices losing.
The 30-stock Dow fell nearly 300 points, or 0.8%, and the S&P 500 fell 0.8%.
The tech-heavy Nasdaq Composite recorded its fourth consecutive session in the red, losing more than 1%.
Mega-cap technology stocks like Apple have underperformed in early 2024, as excessive valuations and uncertainty over when the Federal Reserve will begin cutting rates have led investors to worry that markets have become overly optimistic.
The Fed minutes suggested caution and less euphoria.
Fed minutes curb market euphoria over rate cuts According to the minutes of the December 12-13 Federal Open Market Committee meeting, “participants believe the policy rate is likely at or near its peak for this tightening cycle ”.
The minutes indicated growing optimism among participants about the trend in inflation, noting “clear progress”.
The committee has expressed willingness to cut the benchmark lending rate in 2024 if this trend continues, although it gave no indication that easing could begin as early as March, as futures traders expect.
And this lack of detail disappointed the markets today.
“In the projections presented, nearly all participants indicated that, reflecting improvements in their inflation outlook, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024,” it is stated in the minutes.
In essence, this year will end with the cost of borrowing falling, but by how much and the timing remains uncertain, dampening investor enthusiasm.
According to CME's FedWatch tool, markets are currently pricing in a 70% chance of the Fed cutting rates in March compared to 90% the week before.
Investors also slightly lowered their expectations for the year, with futures prices showing less than 150 basis points (bps) of expected easing this year compared to 160 bps last week.
Goldman Sachs analysts, however, still expect the first rate cut in March and five total cuts in the year, calling the comments in the minutes accommodative.
Fed officials in December had forecast rate cuts of 75 basis points in 2024, pushing money market bets to about double that amount and spurring a year-end rally in stocks and bonds.
Richmond Federal Reserve President Thomas Barkin said Wednesday that the U.S.
central bank is "making real progress" toward containing inflation without inflicting serious damage on the labor market, with a hoped-for soft landing "increasingly likely." .
The spotlight will now be on the highly anticipated US nonfarm payrolls report, due on Friday, which will provide further clues about the labor market, which has shown signs of easing.

Author: A.W.M.

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