Wall Street anticipates more falls after the Fed’s doubts about inflation

Wall Street inflation
Wall Street inflation
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Wall Street anticipates more falls after Wednesday’s bearish close after the Federal Reserve (Fed) anticipated that it will raise rates earlier than expected and that it has begun to debate the withdrawal of stimulus to contain inflation. Its president, Jerome Powell, sowed many doubts in the market, commenting that the “temporary” rise in prices in the US may be more persistent than the central bank had initially estimated.

As The Advertiser Mirror reported this Wednesday live, Powell acknowledged that “yes, there are risks that inflation will be higher than we expect.” In addition, he added that “there is a lot of uncertainty about the timing of the transitory effects on prices and we do not rule out that they may last longer than expected. If we see this happening, we will use the tools we have to control prices, although this is not the case. our central stage.”

In addition, the members of the Fed who decide on monetary policy introduced important changes in their forecasts about the evolution of interest rates. Up to 13 members of the body now anticipate at least two rate hikes in 2023, compared to the estimate in March, when only 7 members of the central bank anticipated at least two increases.

Likewise, the Philadelphia Fed manufacturing index for June fell slightly to 30.7, in line with forecasts; and weekly claims for unemployment benefits have risen unexpectedly above 400,000, highs for the last month.

At the macro level, the Fed significantly raised its PCE inflation forecast for 2021, increasing its estimate to 3.4% from 2.4% for the general PCE; and up to 3% from 2.2% for the underlying PCE.

These new forecasts, which also include a higher expected economic growth in 2021 of 7%, compared to 6.5% anticipated in March, did not like the market. The yield on the 10-year American bond rebounded strongly and now stands at 1.57%.

For Berenberg’s experts, the agency “clearly established the bases for the eventual normalization of its monetary policy, especially by advancing the calendar of the projected increases in interest rates, in line with its economic and inflation forecasts revised at the beginning. rise”.

In his view, Powell “took a more moderate tone than the changes in the Fed’s economic and inflation forecasts and rate projections imply, apparently in an effort to calm financial markets.”

For these analysts, “part of the increase in inflation is temporary, but the risks that the underlying inflationary pressures are increasing“, as Powell himself recognized.

For Anna Stupnytska, a global economist at Fidelity International, “the credibility of the Fed’s” policy “remains the main macro risk in the current risk-friendly environment.”

COMPANIES AND OTHER MARKETS

At the corporate level, Brutal punishment on the stock market for the German pharmaceutical company CureVac, which plummets 45% after communicating that its CVnCoV vaccine candidate against coronavirus has achieved an efficiency of 47% in the provisional analysis, which means that it does not comply with the statistical criteria specified for its success.

Additionally, Microsoft has appointed Satya Nadella, a company executive since 2014, as chairman of the board. Nadella was, previously, director of the corporate division and of the business ‘in the cloud’ of the multinational, thus succeeding Steve Ballmer.

In other markets, West Texas oil rose 0.08% to $72.21. The euro depreciates 0.41% and changes to 1.1945 dollars, while the ounce of gold falls 4.17%, to 1,783 dollars. Finally, bitcoin grows 0.01% to $38,820.