“How to curb inflationary risks without disrupting US growth?” Traditionally, this is the question posed by the American Federal Reserve (Fed). But 2022 is an atypical year. And the fight against inflation, linked to soaring energy prices in particular, outweighs growth. The Fed is ready to sacrifice it. It is in this state of mind that it should announce, this evening, at 8 p.m., a third consecutive increase of 75 basis points in its key rates, to bring them to a new range of 3% to 3.25 %. A few hours before the verdict of the Fed’s monetary policy committee, which has been meeting since Tuesday, the probability of such a turn of the screw is estimated at 80%, according to calculations by CME Group on the basis of futures contracts on Fed-funds. The assumption of an increase of 100 basis points, or 1 percentage point, is credited with 20%, against 17% on Tuesday evening.
Beyond the announcement on the cost of money, the market will be attentive to the speech of the boss of the Fed, Jerome Powell, and the publication of the “dot plot”, this graph with points which presents the estimates of the different voting members of the central bank regarding the evolution of interest rates. ” Jerome Powell should continue to indicate that the Fed will keep rates higher for longer. This view should also be confirmed by the new key rate projections of Fed members (the famous dot plot), which should indicate a higher key rate for 2022 and 2023 and which could remain well above its level. neutral in 2024 and 2025believes Xavier Chapard, at LBPAM. As the markets are already pricing in an aggressive Fed, a rebound after tonight’s meeting would not surprise us. But beyond that, we think that caution is still in order because the pivot towards a less aggressive monetary policy expected by many traders is clearly not (yet) on the agenda even if the economic outlook is deteriorating. »
Rise in oil and defense stocks
Before the Fed’s verdict, the Paris market opted for caution at the start of the week. Driven by Wall Street, the Bedroom 40 still manages to gain 0.87%, to 6,031.33 points, after six consecutive sessions of decline which caused him to lose 5.6%. The volume of transactions remained modest at 2.76 billion euros.
On the geopolitical level, tensions will crescendo on the Russian-Ukrainian front after Vladimir Putin’s statements. The Russian president gave a very vehement speech this morning, affirming that Moscow intends to organize referendums of annexation as of the end of the week in four Ukrainian regions, thus paving the way for a general mobilization or a new nuclear blackmail. The United States says take seriously » this threat, announcing to « severe consequences if Vladimir Putin were to take action. “This is irresponsible rhetoric from a nuclear power “, denounced John Kirby, spokesman for the National Security Council, in an interview with the ABC channel.
This rise in tensions has given a boost to so-called safe-haven assets such as the American currency, which is flirting with a new 20-year peak at $0.9863. At the same time, the yield on the German 10-year bond eased to 1.889%, after reaching an 8-year peak the day before, and the ounce of gold hit a session high of 1.677, 82 dollars on the spot market in London.
On the values front, those related to raw materials, gas and oil in the lead, are well oriented. This is the case of TotalEnergies (+1.55%). For its part, Vallourec jumped 6.34%. The manufacturer of seamless tubes has announced the signing of a ten-year agreement with the Saudi oil company Saudi Aramco relating to the supply of premium casing tubes and services for its drilling activities.
Defense values have also gained ground like Thales (+3.98%) and Dassault Aviation (+3.26%).
CP