While many were expecting a longer pause in the raising of interest rates by the US Federal Reserve it seems that the June pause that saw the benchmark interest rate maintained at a target range of between 5 % and 5,25 % may be short lived.
๐ Mastering inflation does not appear to be an easy challenge, especially in the services sector, which should lead to a now widely anticipated hike at the end of July, followed by a pause taking into account the languishing manufacturing sector. ๐๐ ๐๐ต๐ฒ ๐ฒ๐ป๐ฑ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ฒ๐ฎ๐ฟ, ๐๐ต๐ฒ ๐ฏ๐ฒ๐ป๐ฐ๐ต๐บ๐ฎ๐ฟ๐ธ ๐ฟ๐ฎ๐๐ฒ ๐บ๐ฎ๐ ๐ฒ๐๐ฒ๐ป๐๐๐ฎ๐น๐น๐ ๐ต๐ถ๐ ๐ฎ ๐ฟ๐ฎ๐ป๐ด๐ฒ ๐ผ๐ณ ๐ฏ๐ฒ๐๐๐ฒ๐ฒ๐ป ๐ฑ,๐ฑ % ๐ฎ๐ป๐ฑ ๐ฑ,๐ณ๐ฑ %. No rate cuts are anticipated by Fed officials until 2024 ๐ซ
๐ In the UK recent signals show a more important than expected slowdown of Headline CPI in June and also a market slowdown in food inflation. If other indicators evolve in the same direction (wage data), ๐๐ฒ ๐บ๐ฎ๐ ๐ฒ๐ ๐ฝ๐ฒ๐ฐ๐ ๐๐ต๐ฎ๐ ๐๐ต๐ฒ ๐๐ฎ๐ป๐ธ ๐ผ๐ณ ๐๐ป๐ด๐น๐ฎ๐ป๐ฑ ๐๐ผ๐๐น๐ฑ ๐ผ๐ฝ๐ ๐ณ๐ผ๐ฟ ๐ฎ ๐ฎ๐ฑ ๐ฏ๐ฝ ๐ฟ๐ฎ๐๐ฒ ๐ต๐ถ๐ธ๐ฒ ๐ถ๐ป ๐๐๐ด๐๐๐ (in state of the foreseen 50 bps) ๐ท
๐ Looking at the behavior of Western economies, we should not expect a more accommodating rate policy in Europe for some time ๐ฆ
๐ช๐ต๐ฎ๐โ๐ ๐๐ต๐ฒ ๐ถ๐บ๐ฝ๐ฎ๐ฐ๐ ๐ณ๐ผ๐ฟ ๐๐ผ๐๐ฟ ๐ฐ๐ผ๐บ๐ฝ๐ฎ๐ป๐?
โ Higher interest rates are here to stay. Even though long term forward rates curbs still show a high rate on short term and decreasing rates on longer term. Isnโt time pushing this pike forward, finally ending up with long term higher rates?
Companies financed through short term rates already felt increasing finance costs. Mid- and long term financed companies are still (partly) benefiting from fixed interest rates on longer term contracts, but are anxiously looking at the end date of those facilitiesโฆ
๐ฒ Ernest Partners is there to help you review your financing structure and anticipate higher financing cost. Interested? Send us a PM?
