D-Day for the US Federal Reserve and whatever it decides tonight will have an impact on global financial markets. Observers are certainly counting on a fourth consecutive increase of 75 basis points in the Fed Funds rate, but it is the future direction of monetary policy that is debating, or at least the way to interpret it. For now, futures contracts on Cac 40 suggest an increase of 0.3% at the opening of the Paris Stock Exchange.
Investors are waiting for Jerome Powell to signal at his post-FOMC press conference a reduction in the scale of the next tightenings and a return to more “standard” hikes starting in December. ” We agree that a moderation in the pace of rate hikes starting at the next meeting is reasonableadmits John Velis, Macro and Forex Strategist at BNY Mellon. First, we heard it from President Powell himself at the last two post-FOMC press conferences, as well as from key officials before the blackout period ten days ago.
Nothing new in the speech of the Fed?
Much the same language was used in both cases. In his opening remarks from the July press conference, Powell said it ‘will probably be appropriate to slow the pace of hikes as we assess how the cumulative effect of monetary adjustments affects the economy and inflation’. This was repeated at the September press conference, almost verbatim.
Second, simple arithmetic as to the final rate, which we have long agreed is expected to peak at 5% in March 2023, implies that after a 75 basis point hike on Wednesday, the Fed funds target rate (in its upper part) would be at 4%, which would still leave 100 basis points to reach this final rate. Which we believe would involve two meetings (in December and February) at 50 basis points, followed by a break “. So can we really speak of a ‘pivot’ or an inflection in Fed policy? We believe this is more of a normal development in a monetary tightening cycle “, specifies the strategist.
Jerome Powell on eggs
Everything will therefore depend on how the markets will welcome Jerome Powell’s intervention, deeming it “hawkish” or “dovish”, which the Fed is seeking to avoid as the latest figures on job offers point to a market work always in tension. ” We believe that Chairman Powell will redouble his efforts to avoid saying anything that could be interpreted as a sign that an inevitable reduction in the magnitude of rate hikes is a shift towards the end of the monetary tightening cycle. “Said Kevin Cummins, chief economist at NatWest Markets, quoted by Reuters. The question remains all the more open since by the December meeting, the Fed will have learned of two new statistics concerning inflation and employment, including the one expected on Friday.
In the meantime, the markets will be watching the ADP survey on private employment in the United States in October, as well as the manufacturing PMI indices in the euro zone and non-manufacturing indices across the Atlantic.
Sodexo and Imerys confirm, acquisition for Verallia
Sodexo. Ahead of an investor meeting, the collective catering group confirmed that it is aiming for organic growth in its turnover of between 8% and 10% for the 2023 financial year ending at the end of August and an operating margin close to 5.5% at constant rates. Organic growth had increased by 15.7% in 2022, supported by the post-Covid recovery. The operating margin was 5%.
Imerys confirmed its profitability targets for 2022 after recording organic growth of 13.3% in the third quarter and 14% in the first nine months of the year.
Veralia announced that it has signed a firm agreement with a subsidiary of Sun European Partners LLP to acquire Allied Glass, a “leader” in the premium glass packaging segment in the United Kingdom, specializing in the spirits market.