The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
The S&P 500 ended its two-day climb on Wednesday, closing lower after fluctuating throughout the session as investors evaluated the Federal Reserve's potential rate cuts and analyzed recent housing-market data. Meanwhile, the Nasdaq 100 rose modestly, supported by strong performance in tech stocks like Micron Technology Inc and Nvidia Corp.
The 10-year US Treasury yield advanced to 3.79%, while the Bloomberg Dollar Spot Index gained after a 0.5% drop the day before. Micron shares surged more than 10% in post-market trading after the company provided a robust revenue forecast, driven by demand for AI hardware.
Fresh data revealed that US new home sales fell last month, though mortgage rates have dropped for eight consecutive weeks, sparking interest in home purchases. Skylar Olsen, chief economist at Zillow, noted that mortgage rates are unlikely to drop much further.
Market Eyes Fed Moves and Post-Rate-Cut Catalysts
Investors remain cautious following last week’s half-point rate cut by the Fed, seeking further catalysts such as a speech from Fed Chair Jerome Powell and key price data later this week. Some analysts, like Michael Rosen of Angeles Investments, believe the market may be overestimating the Fed's willingness to ease rates further, despite the recent accelerated rate cuts.
Fed Governor Adriana Kugler expressed support for last week's rate cut, suggesting more cuts may be appropriate if inflation continues to cool.
Looking ahead, Solita Marcelli of UBS Group AG emphasized the Fed's success in guiding the US economy to a soft landing as a key factor for broader market outlooks. Gargi Chaudhuri of BlackRock expects US growth to slow but remain positive, warning of potential volatility in the lead-up to the US election.
Global Markets React to Stimulus and Economic Data
Chinese stocks rallied for the sixth consecutive day after the central bank made its largest-ever rate cut on one-year policy loans, following a sweeping stimulus package. However, optimism around China's measures faded in other regions, with Latin American currencies, including the Mexican and Colombian pesos, declining.
In Europe, growing concerns about the economic outlook have led to expectations that the European Central Bank (ECB) may reduce rates next month. HSBC economists predict rate cuts at every ECB meeting from October to April, while Anwiti Bahuguna of Northern Trust highlighted unexpectedly slow economic growth in the region.
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