This fall marks a pivotal moment for the global economy as central banks worldwide, including the U.S. Federal Reserve, the European Central Bank, and the Bank of England, are poised to initiate or continue interest rate cuts. These anticipated rate reductions signal a shift away from the historically high borrowing costs that have persisted since the pre-2007-2008 Financial Crisis era.
In September, the U.S. Federal Reserve is expected to join other major central banks in lowering key rates. Investors have shown increased confidence in this move following statements from Fed Chair Jerome Powell at the Jackson Hole symposium, where he indicated that the "time has come for policy to adjust." Powell emphasized the Fed's commitment to maintaining a strong labor market while continuing progress on inflation.
Market reactions have been mixed. While European and U.S. stock indices have shown significant gains this year, there are concerns about the potential volatility in the coming months. According to Beat Wittmann, chairman and partner at Porta Advisors, the market has largely recovered in terms of price momentum and sentiment. However, he cautioned that the upcoming September and October periods could see choppiness driven by factors such as geopolitics and corporate earnings.
Despite the optimism surrounding rate cuts, there are underlying concerns about their impact on the broader economy. Arnaud Girod, head of economics and cross asset strategy at Kepler Cheuvreux, expressed skepticism about the long-term effects of these cuts, suggesting that they could coincide with weakening earnings momentum. The U.S. jobs market data, set to be released in early September, remains a critical factor to monitor.
Currency markets are also closely watching the interplay between inflation, rate expectations, and economic growth. Jane Foley, head of foreign exchange strategy at Rabobank, highlighted the potential implications of the euro's performance against the dollar and how it might influence the timing of ECB rate cuts.
As central banks navigate this new economic landscape, the markets are bracing for a period of adjustment, with equities remaining a favored asset class despite the uncertainties ahead. The outcome of the U.S. election could further impact monetary policy, particularly if a change in administration leads to shifts in trade and economic strategies.
(Source:www.cnbc.com)
In September, the U.S. Federal Reserve is expected to join other major central banks in lowering key rates. Investors have shown increased confidence in this move following statements from Fed Chair Jerome Powell at the Jackson Hole symposium, where he indicated that the "time has come for policy to adjust." Powell emphasized the Fed's commitment to maintaining a strong labor market while continuing progress on inflation.
Market reactions have been mixed. While European and U.S. stock indices have shown significant gains this year, there are concerns about the potential volatility in the coming months. According to Beat Wittmann, chairman and partner at Porta Advisors, the market has largely recovered in terms of price momentum and sentiment. However, he cautioned that the upcoming September and October periods could see choppiness driven by factors such as geopolitics and corporate earnings.
Despite the optimism surrounding rate cuts, there are underlying concerns about their impact on the broader economy. Arnaud Girod, head of economics and cross asset strategy at Kepler Cheuvreux, expressed skepticism about the long-term effects of these cuts, suggesting that they could coincide with weakening earnings momentum. The U.S. jobs market data, set to be released in early September, remains a critical factor to monitor.
Currency markets are also closely watching the interplay between inflation, rate expectations, and economic growth. Jane Foley, head of foreign exchange strategy at Rabobank, highlighted the potential implications of the euro's performance against the dollar and how it might influence the timing of ECB rate cuts.
As central banks navigate this new economic landscape, the markets are bracing for a period of adjustment, with equities remaining a favored asset class despite the uncertainties ahead. The outcome of the U.S. election could further impact monetary policy, particularly if a change in administration leads to shifts in trade and economic strategies.
(Source:www.cnbc.com)
