What lies ahead remains to be seen as markets await the minutes of the US Fed June meeting. Whilst a 75 bps hike may unsettle the markets, a 50 bps hike on the other hand will surprise and soothe battered markets.
Analysts believe that an extremely hawkish commentary from the US Fed would roil the markets going ahead, which may ultimately unsettle global investors and trigger a broad-based pullback in asset prices and fuel declines in the US equity and bond markets.
If the US Fed raises the benchmark rate by 75 bps, it would be the biggest hike seen since 1994. Historically, the US Fed has kept interest rates in the range of 2 to 4 per cent to balance growth.
Global investment bankers like Barclays and Jefferies make the case for 75 bps rise in interest rates. Analysts at HSBC believe the Fed will launch three series of 50 bps rate hike in June, July, and September. Others believe that US Fed may announce 50 bps rate hike, followed by several hikes over the next 2 years with the QE tightening programme to gather pace.
Since January 2022, the US Fed has started to raise interest rates to tame the red-hot inflation and has so far launched a series of three rate hikes, totaling one per cent. Given this, the NASDAQ Composite has bled the most, sinking over 31% so far in 2022, the S&P 500 and Dow Jones have slipped over 21% and 16% respectively during the same period.
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