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BOV Market Watch - Week ending 6th May 2022
06 May 2022
Fed raises rates by 50 basis points to fight inflation. In an effort to bring US inflation down from its 40-year high, the Federal Reserve (Fed) on Wednesday announced its widely expected interest rates rise of half a percentage point. The Fed’s rate setting committee raised the fed funds rate by 50 basis points to a range of 0.75-1.0 percent, the biggest hike in 22 years. In a news conference after the meeting, Fed Chair Jerome Powell struck a balanced tone that ignited a relief rally in stocks and bonds, calming fears that even bigger rate hikes would lead to a severe economic slowdown. "Inflation is much too high and we understand the hardship it is causing," Powell said.

Bank of England raises interest rates to highest level in 13 years. The Bank of England on Thursday raised its benchmark interest rate by a quarter-point as expected to its highest level since 2009 as policymakers try to curb rising inflation that has hit its highest level for 30 years and expected to breach ten percent by the end of the year, with fuel, energy and food costs soaring partly due to the Ukraine war. The Bank’s Monetary Policy Committee approved a 25-basis point increase by a majority of 6-3, taking the base interest rate up to one percent. It is the fourth time in a row the committee has voted in favour of an interest rate hike. In his comments to the press, Governor of the Bank of England Andrew Bailey said the UK was set for "a very sharp slowdown" but declined to call it a recession.

German factory orders fall in March. German factory orders fell for the first time in four months in the runup to Russia’s invasion of Ukraine, suggesting that the manufacturing sector of Europe’s economic powerhouse is seeing a fresh downturn. Figures published by Destatis on Thursday show that orders plunged by 4.7 percent in March compared to the previous month. Economists had forecast orders to fall by 1.1 percent in March. The overall fall in demand was largely driven by a 6.7 percent contraction in foreign orders. Domestic orders logged a moderate decrease of 1.8 percent.

China services, manufacturing sectors contract in April. According to a private-sector survey, China’s services sector activity shrank at the second-sharpest rate in the data series in April, as authorities imposed restrictions on businesses and daily life in major cities including Shanghai. The Caixin services Purchasing Managers' Index fell to 36.2 in April from 42.0 in March. A score below 50.0 indicates contraction in the sector. The services sector accounts for more than half of the nation's output and over 40 percent of its employment. The Caixin composite output index, which comprise both the manufacturing and services sectors, came in at 37.2 in April, down from 43.9 in March. That rate of contraction was the second-sharpest in the series history.

India’s Central Bank unexpectedly raises interest rates. The Reserve Bank of India (RBI) unexpectedly hiked interest rates by 40 basis points on Wednesday. The increase was the first increase in rates in almost four years. Since the start of the pandemic, the bank had been lowering rates to boost the economy that was battered by the coronavirus outbreak. Persistent inflationary pressures are becoming more acute, particularly on food, Governor Shaktikanta Das said in an online briefing, adding that there is a risk prices stay at this level for “too long” and expectations become unanchored. The RBI has now joined a league of central banks, facing record inflation figures, who have hiked rates and plan to tighten policy further while risking a recession.
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).