FT News Briefing Will rising interest rates actually lower prices?
Jul 14, 2022
US inflation has surged to 9.1%, raising concerns about the Federal Reserve's interest rate strategies. Investors are wary of long-term bonds amid shifting market dynamics. Additionally, geopolitical tensions have derailed a German-Chinese satellite venture, emphasizing the clash over technological supremacy. Meanwhile, international discussions surrounding grain negotiations continue in the wake of the Russia-Ukraine conflict, showing the interconnectedness of financial policy and global stability.
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Market Reaction to Inflation
- Markets barely reacted to the latest US inflation numbers, which were worse than expected.
- Investors now anticipate a full percentage point interest rate increase, a challenge for the Federal Reserve.
Shifting Interest Rate Expectations
- Interest rate expectations for the Federal Reserve have shifted significantly.
- The odds of a full percentage point interest rate increase have jumped considerably.
Monetary Policy and Inflation
- Central banks are serious about controlling inflation, as seen by the Bank of Canada's recent rate hike.
- However, monetary policy's effect on inflation takes time and isn't immediate.