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Markets waiting for central banks: Will inflationary pressure continue?

Published Dec 05, 2023 09:24
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Investing.com - European markets await macro data on Tuesday -Ibex 35, CAC 40, DAX... -, with US employment report to be released on Friday as the main reference for the week. Data that give the Fed many clues as to what interest rate strategy to follow.

"The market's focus is on next week's central banks and Friday's employment data. Therefore, they will opt for moderate declines today, after recent strong gains. A healthy correction to gain momentum again," they say at Bankinter (BME:BKT).

Early this morning we learned that the Reserve Bank of Australia has maintained its unchanged rates at 4.35%, in further evidence of the pause strategy being pursued by the world's major central banks.

"Bond and equity markets, which have experienced strong gains in November, are likely to take a breather, at least until next week, when the monetary policy committees of the three major Western central banks, the Reserva Federal (Fed), the BCE and the Bank of England (BoE) will meet, where they are expected to clarify what their next monetary policy moves will be and whether they are in line with what markets have been discounting lately: that all of them have ended their rate hikes and that the next moves in official rates will be downwards", Link Securities comments.

"Interesting will be the ECB's one-year inflation expectations (forecast to moderate to 3.8% 'vs' 4.0% previously) and three-year inflation expectations (2.5%e stable), in order to see to what extent inflationary pressures continue to be a problem and the expectations of rate cuts discounted by the market may be premature (the market discounts a total of 5 cuts in 2024, the first between March and April)", point out Renta 4 (BME:RTA4).

"In this regard, we highlight the statements by Nagel of the ECB, stating that it is too early to declare victory over inflation, insofar as he expects the disinflationary trend to slow (lower base effects, end of aid in the form of energy price caps, wage pressures), while the escalation of geopolitical tensions could put upward pressure on inflation again", added the fund manager.

"De Guindos was of the same opinion. For his part, Schnabel says that we would have seen the ceiling on interest rates (favourable inflation data), but that we must be cautious with expectations of lower rates as we cannot yet give up on inflation", these analysts conclude.

Translated from Spanish using DeepL.

***

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Markets waiting for central banks: Will inflationary pressure continue?
 

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Comments (1)
Alex Ounz
Alex Ounz Dec 05, 2023 9:55
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Inflation is expected to persist as long as there is an abundance of currency in the economy, and there is no clear end in sight for the reduction of inflationary pressures until there is a rise in job losses.
 
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