- The Fed raised rates for the first time since July 2023 and signaled another hike is possible, citing inflation stoked by rising oil prices.
- A renewed US tightening cycle strengthens the dollar, pressures other currencies, and reduces room for other central banks to ease monetary policy.
- Higher Treasury yields raise the hurdle for equities and risk assets by increasing financing costs and reducing the present value of future earnings.
- Developed-market central banks are tightening in sync, with the ECB raising rates last week and J.P. Morgan Asset Management expecting the BOJ to hike this week.
Quotes
“The Fed's hike and signals about another one are putting some upward pressure on the dollar and downward pressure on other currencies”
“It does put pressure on Japan to continue to follow suit and raise interest rates as well”
“Developed market central banks are in sync with tightening monetary policy to address inflation concerns”
“I think if the yield move were to start to get disorderly, then I think you have a bigger digestion problem for the equity market, but I think the economy and the market can, to some degree, handle this if it remains orderly”