Tradingview Weekly Market Wrap Monday 21 March 2022

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As expected, the US Federal Reserve announced an interest rate hike of 0.25 percentage points. The dot plot with forecasts of interest rate developments suggests a seven-fold increase this year, to 1.75-2% (in December the committee expected three 0.25 percentage point hikes). By the end of 2023, the interest rate could rise to 3%.

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At the next meeting, the regulator could announce the reduction of assets on the balance sheet. The Fed noted that while “the consequences of the Russian invasion of Ukraine remain highly uncertain, they will lead to pressures on prices and economic activity over the medium term.”

GDP is forecast to increase by 2.8% at the end of this year. Expectations for consumer price increases in 2022 are revised upward to 4.3% from 2.6%, next year to 2.7% from 2.3%, and in 2024 to 2.3% from 2.1%. Unemployment this year is expected to be 3.5%, the same as next year. In 2024, the Fed expects unemployment to be 3.6%, up from the previous forecast of 3.5%.

Along with that, it is worth mentioning that Joe Biden has signed a $1.5 trillion budget for the remainder of the fiscal year. 782 billion will be spent on defense, while $730 billion will be spent on non-defense items. The package also provides $13.6 billion for humanitarian, military, and economic aid to Ukraine and its neighboring countries. Overall, the bill extends the government funding period until September 30.

Spending on Covid was excluded from the bill. The White House had requested $22.5 billion, but during negotiations, this amount was reduced to $15.6 billion and eventually eliminated entirely. Without additional funding, the federal government would be forced to stop accepting new applications for COVID-19 treatment for the uninsured, and state appropriations for life-saving monoclonal antibody drugs would be reduced by 30%. Purchases of antiviral tablets and additional doses of vaccines will also be at risk.

In England, the BOE raised interest rates for the third consecutive time. Eight of the nine members of the Monetary Policy Committee voted to raise the bank rate from 0.5% to 0.75%. The central bank’s deputy governor, John Cunliffe, voted to keep rates unchanged, warning a hard hit to demand due to rising commodity prices. The Bank of England said inflation is expected to be around 8% in April, almost a full percentage point higher than forecast last month, and warned it could peak even higher later in the year.

In China, the Hang Seng index has experienced one of the biggest rebounds since 2008. Chinese Vice Premier Liu He urged government agencies to implement market-friendly policies. Liu’s remarks came a day after Hong Kong-listed mainland paper fell to 2008 lows and Chinese stocks plunged to a 21-month low amid growth concerns and rising geopolitical tensions.

 

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