Market outlook - Rate Hikes

The big event for this week will be the announcement of the Federal Funds Rate going forward. Just as important – if not even more – will be trying to interpret the guidance from Chairman Powell regarding the path of the monetary policy going forward. There is a firm belief among analysts that the Fed will keep rates steady this time around, but also a fear that the next FOMC meeting that will conclude on Nov 1st could bring yet another 0.25% hike. This would seriously derail the narrative of rates having peaked, and if there is one thing that the markets really hate, it is uncertainty about the monetary policy of central banks.
Interestingly, Europe rallied following ECB’s rate announcement on Thursday last week. This marked the 10th consecutive hike from the ECB, and it meant that the rate now sits at a record high of 4%. On its own this should not be positive for the markets but because the ECB Governing Council has made suggestions that it sees steady rates for the foreseeable future, the overall message was of a bullish nature for stocks.

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