Please find below our Investment Market Update as at 5th May 2023.
Is this the tipping point?
On Wednesday of this week, once again the US Federal Reserve (Fed) increased interest rates by 0.25%. It was expected. What everyone was keen to hear, was the accompanying rhetoric, so what was the message?
Over the last few months, the message centred around “some additional policy firming may be appropriate”.
This time there was a slightly different message in that they said, “it would now take a number of data points and factors to determine the extent to which policy forming may be appropriate”.
They also commented that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation”.
In the Q&A following their announcement, Chairman Powell stated “the committee had discussed pausing. However, that was not for this meeting”, but noted that “they are likely not far off, indeed they could already now be at a sufficiently restrictive level”. He also reiterated that “the Fed’s assessment is consistent with no rate cuts in 2023”.
As you can imagine, investment markets didn’t like the last comment as the markets were anticipating rate cuts by the end of the year. However, as I have stated recently, many forecasters have seen their predictions wide of the mark over the last 18 months, including the central banks. The above statement gives them some protection and some wriggle room if matters improve.
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.