Latest fraudulent alert - last updated on Apr 2023. To find out more information and how to protect yourself, please click here.

Investment Institute
Weekly Market Update

Take Two: Fed chair signals further rate increases; BoE surprises with 50bp hike

  • 26 June 2023 (3 min read)

What do you need to know?

Federal Reserve (Fed) Chair Jerome Powell supported expectations for further interest rate increases this year in a testimony to Congress. He said another 50 basis points (bp) of hikes – as suggested in the central bank’s Summary of Economic Projections – was “a pretty good guess” if conditions prove as predicted. However, other Fed officials warned that raising rates too fast risks derailing US growth. Meanwhile, Antony Blinken was the first US Secretary of State to visit Beijing since 2018, boosting hopes that tensions between the two countries might ease - though critical comments from President Joe Biden about Chinese Premier Xi Jinping complicated the picture.

Around the world

The Bank of England (BoE) surprised markets with a 50bp rise in interest rates, taking the cost of borrowing to 5%, a level not seen since 2008, as inflation remained higher than expected. Headline inflation was unchanged at 8.7% in May – most analysts had expected a fall to 8.4%. Core inflation, excluding food, energy, alcohol and tobacco, rose to 7.1% – a 31-year high. Seven of the BoE’s Monetary Policy Committee voted for the hike while two preferred to keep rates on hold, minutes of the meeting showed. Separate figures showed UK debt is now higher than the country’s annual GDP for the first time since 1961.

Figure in focus: 1981

A key index of Japan’s inflation rate saw its biggest increase since 1981, potentially putting pressure on the Bank of Japan to reduce its stimulus programme. The ‘core-core’ measure, which excludes fresh food and fuel, rose by an annual 4.3% in May from 4.1% in April. Meanwhile headline inflation fell in line with expectations to 3.2% - its lowest level this year. Flash Purchasing Managers’ Index data showed growth momentum slowed in June with the weakest expansion of output in four months. The composite index including both manufacturing and services fell to 52.3 in June from 54.3 in May – a reading above 50 indicates expansion.

Words of wisdom:

Just Transition: The idea that the switch to a more sustainable global economy should not widen inequalities or damage poverty reduction efforts, most notably in the developing world. World leaders, including those from the US, France, Brazil, Japan and South Africa, released an open letter ahead of a climate financing summit in Paris last week as they sought to “recover development gains lost in recent years”. They want to embed the just transition in an overhaul of the global financial system that would drive capital towards tackling climate change, hitting development targets and potentially relieving debt burdens in emerging markets.

What’s coming up

On Monday Germany’s closely watched Ifo Business Climate indicator is published. Canada issues updated inflation numbers for May on Tuesday while on Wednesday China posts updated industrial profit numbers. Thursday sees a final estimate for first quarter (Q1) US GDP growth announced; previous data indicated the world’s largest economy expanded by 1.3% over the period, revised up from an initial estimate of 1.1%. The UK follows with its own final Q1 growth estimate on Friday, when the Eurozone issues flash inflation numbers for June – price rises across the bloc were confirmed at 6.1% in May, the lowest since February last year.

Related Articles

Weekly Market Update

Take Two: US inflation rises more than expected; ECB hints it may cut rates soon

  • by AXA Investment Managers
  • 15 April 2024 (3 min read)
Weekly Market Update

Take Two: Eurozone inflation eases; Fed wants more data before rate decision

  • by AXA Investment Managers
  • 08 April 2024 (3 min read)
Weekly Market Update

Take Two: US inflation rises; Japan avoids recession as Q4 GDP revised up

  • by AXA Investment Managers
  • 18 March 2024 (3 min read)

    Disclaimer

    This website is published by AXA Investment Managers Asia Limited (“AXA IM HK”), an entity licensed by the Securities and Futures Commission of Hong Kong (“SFC”), for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy, sell or enter into any transactions in respect of any investments, products or services, and should not be considered as solicitation or investment, legal, tax or any other advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities under any applicable law or regulation. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation, investment knowledge or particular needs of any particular person and may be subject to change at any time without notice. Offering may be made only on the basis of the information disclosed in the relevant offering documents. Please consult independent financial or other professional advisers if you are unsure about any information contained herein.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee such opinions, estimates and forecasts made will come to pass. Actual results of operations and achievements may differ materially. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Information herein may be obtained from sources believed to be reliable. AXA IM HK has reasonable belief that such information is accurate, complete and up-to-date. To the maximum extent permitted by law, AXA IM HK, its affiliates, directors, officers or employees take no responsibility for the data provided by third party, including the accuracy of such data. This material does not contain sufficient information to support an investment decision. References to companies (if any) are for illustrative purposes only and should not be viewed as investment recommendations or solicitations.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and that past performance is no guarantee of future returns, investors may not get back the amount originally invested. Investors should not make any investment decision based on this material alone. 

    Some of the services listed on this Website may not be available for offer to retail investors.

    This Website has not been reviewed by the SFC. © 2023 AXA Investment Managers. All rights reserved.