- Investors expect a pause at the upcoming Fed meeting.
- The Bank of England is expected to raise rates for the 15th time on Thursday.
- On Monday, the UK’s FTSE 100 experienced its most significant decline in over a month.
On Monday, US equities closed with minimal changes as investors awaited the US Federal Reserve’s upcoming policy decision. The three major US stock indices ended the day with slight gains in a volatile session, but investors lacked firm conviction leading into the Fed’s two-day monetary policy meeting.
The week’s focal point is the Federal Reserve’s policy meeting, expected to result in a pause in rate hikes, keeping the Fed funds target rate unchanged for the second time since March 2022. The central bank has committed to adapt to economic data, which indicates that core inflation is gradually approaching the Fed’s 2% target and suggests a solid US economy.
FOMC projections (Source: Bloomberg News survey of economists)
The Federal Open Markets Committee (FOMC) will also release its quarterly Summary of Economic Projections. This includes the “dot plot” showing members’ expectations regarding future interest rates. Economists believe the Fed will project higher for longer rates.
Financial markets are currently pricing in a 99% probability of the Fed maintaining rates at 5.25%-5.00% on Wednesday. Beyond that, the trajectory is less certain, with a 69% chance of the FOMC holding steady in November.
Meanwhile, European equities declined on Monday due to a disappointing strategic plan from Societe Generale’s new CEO, causing a 12.1% drop in the bank’s shares. Societe Generale anticipates minimal or no sales growth in the coming years. Investors remained wary ahead of major central bank meetings.
Elsewhere, Slovak policymaker Peter Kazimir suggested that Thursday’s European Central Bank rate hike might mark its last move. However, policymakers would require until March to confirm this, and additional increases could still be under consideration.
This week, central banks are in the spotlight, with the Bank of England (BoE) expected to raise rates for the 15th time on Thursday.
On Monday, the UK’s FTSE 100 experienced its most significant decline in over a month, primarily due to a decrease in automobile and parts company stocks, as investors anxiously awaited crucial decisions on central bank interest rates.
Money markets indicate an 80% likelihood of the BoE increasing rates by 25 basis points to 5.5% on Thursday. Additionally, Goldman Sachs has revised down its projection for the BoE’s ultimate rate, now expecting it to reach 5.5%.