In view of the reaction of the world’s financial markets to the sharp acceleration in US inflation, it is doubtful that the markets had really taken on board the change in the monetary paradigm under way. If the reaction was limited to the European close, Wall Street really took the hit, especially since a Fed official declared himself in favor of a strong reaction from the American central bank.
St. Louis Fed Chairman James Bullard said pushing inflation to a 40-year high had made him ” clearly more hawkish. A voting member of the Fed’s monetary policy committee, James Bullard told Bloomberg that he now favors a 100 basis point hike in the Fed funds rate by July 1.
Increases outside FOMC meetings?
In this interview, granted, James Bullard did not rule out the possibility of tightening outside the scheduled FOMC meetings.
If he is considered one of the most hawkish members of the committee, the effect was immediate and the contracts future Fed funds estimates suggest the market is pricing a near 90% chance of a 50 basis point rate hike in March, and nearly 95% the chance of at least 100 basis points by June. In the bond market, the yield on the US 10-year bond crossed the 2% mark for the first time since August 2019. Sensitive to changes in interest rates, the Nasdaq Composite fell 2.1% closing in New York on Thursday evening and futures contracts on the Nasdaq 100 fell 0.8% this morning.
Christine Lagarde for a gradual approach
On this side of the Atlantic, the ECB will also have to consider tightening its monetary policy in the face of the return of inflation in the euro zone. Christine Lagarde, however, insists in the German press on the fact that raising interest rates too quickly would not make it possible to stem the rise in prices and would only have the effect of weakening the economy. On the contrary, it advocates a gradual change in monetary policy.
On the value side, Rexel announced forecast a further increase in sales in 2022, after achieving what he described as a “record” turnover last year. The electrical equipment distributor forecasts sales growth of between 4% and 6% over one year in 2022, on a like-for-like basis and on a constant number of days.
TF1 reported a more than fourfold increase in its net profit to 225.3 million euros in 2021, a year marked by the announcement of the proposed merger with competitor M6. Turnover increased by 16.6% to 2.43 billion euros.