Switzerland Maintains Pace of Rate Hikes

The Swiss National Bank continued to tighten its monetary policy by raising its key interest rate by 50 points to 1.5% today. This decision is broadly in line with the market expectations of economists prior to the Credit Suisse story. The decision mainly shares the same logic with that of the Fed and the ECB: It is important to move within market expectations to avoid market chaos.

By Hiking and Retaining Conditionality, BoE Thus Bought Some Time

he central bank said it’ll make a full assessment on the economic implications at the next meeting in May, when new forecasts are due. By hiking and retaining the conditionality, the BoE thus bought some time.

Bank of England Raises Interest Rate and Optimism

The Bank of England raised its interest rate by 25 points to 4.25%, in line with market expectations. Two members voted to keep rates on hold for the third meeting, while seven others voted against it.

Bank of England Review

We revise our call to expect the BoE to deliver a final 25bp hike in May. Our expectations are in line with current market pricing (currently 30bp priced until August 2023) as we expect the rest of the BoE committee to increasingly turn less hawkish amid a weakening growth backdrop and easing labour market conditions. Markets are pricing in 30bp of cuts during H2.  We still believe that the first rate cuts will not be delivered before the beginning of 2024.

Cliff Notes: The End of the Global Tightening Cycle

The FOMC and Bank of England both delivered 25bp rate hikes at their March meeting, bringing their respective tightening cycles to an end – in our view. The RBA’s policy tightening is also near its end, with one final 25bp move to occur in May.

Focus Turns to PMI Data

Today, focus turns to March flash PMIs from Europe and the US. Activity is expected to moderate in service sector as the boost from pent-up demand continues to fade, while manufacturing momentum is set to continue its recovery in Europe while the US index is expected to take a small hit lower. Data for the indices has been collected mid-month so we are curious to see whether the recent turmoil has affected the respondents' sentiment.

Safe Haven Bids Intensified During US Dealings

Safe haven bids intensified during US dealings, where recessionary and financial stability concerns flared up again. US yields dropped another 10 bps in the 2y-3y segment while adding 4.6 bps at the long end (30y).

Focus Remains on Financial Stability Risks

Markets The Credit Suisse liquidity stopgap helped restore some calm in the run-up to the ECB meeting. The central bank pushed through with its flagged 50 bps rate hike despite recent financial stability concerns. They lifted the deposit rate from 2.5% to 3% as inflation is projected to remain too high for too long (>2% […]

USD/JPY – Yen Climbs to 1-mth High on Market Turmoil

The Japanese yen is in positive territory on Friday, trading at 133.02, up 0.56%. USD/JPY touched a one-month low on Thursday, falling as low as 131.72. How will BoJ react to the new wage agreement? The Kazuo Ueda era has begun at the Bank of Japan. Former Governor Kuroda has departed after 10 years at […]

Did the ECB Just Predict the Fed?

Since the start of the banking crisis just a week ago, markets have been recalibrating their expectations for central banks. It’s broadly understood that the main driver of weakness in the banking sector at the moment is higher interest rates. This has led to the natural conclusion that the Fed won’t hike as aggressively, or […]