As mentioned earlier, the chairman of the US Federal Reserve made some comments in a forum there that upset investors.
“While more recent data shows solid growth and continued strength in the labor market,So far this year, there has been no further progress on returning to the 2% inflation target.” Jerome Powell spoke during a panel discussion.
As Capital’s Kyle Rodda points out, the Fed appears to be “changing its tone.”
“And we’re starting to realize that interest rate cuts may not be as deep as previously thought this year, or may not be cut at all,” he added.
” Markets have lowered the implied probability of a rate cut in the US this year to less than double, the interest rate-sensitive two-year bond yield will once again reach 5%. ”
But as AMP’s Diana Mousina also pointed out this morning, this sentiment need not be limited to Australia.
“The U.S. Federal Reserve is often thought of as the first mover in a cycle of tightening or easing interest rates,” she writes.
“Growth in Canada, New Zealand, the euro area and Australia has slowed significantly (to a lesser extent). By comparison, the US economy has held up well.
“The U.S. economy is often seen as a leading indicator for the rest of the world, from global economic growth to its impact on financial markets.
“but The Fed is unlikely to be the first major central bank to start cutting rates this cycleJust like it wasn’t the first big bank to raise rates after the pandemic.
“Investors need to remember that.” The domestic growth situation is the main factor in the central bank’s monetary policy decisions. ”
