Because of the current uncertainty, market expert Ajay Bagga tells that the US Federal Reserve is likely to take its time raising interest rates. He believes the interest rate hike in March will be 25 basis points, as opposed to the conventional expectation of 50-100 basis points. He also ruled out the prospect of lowering interest rates.
There is still time before the US Fed meeting on March 16, and if Russian President Vladimir Putin’s posture on Ukraine becomes harsher, the possibility of a bigger rate hike becomes much more unlikely, according to Bagga.
The Fed may argue that investment has slowed as a result of the lingering uncertainty and that consumer confidence has suffered as a result.
Even though the European Central Bank (ECB) has declared that it would not raise rates this year, European bond yields show two 50-basis-point rate hikes in 2022, according to Bagga, who is also the Chairman of Elements Platforms.
The market was also persuaded that, like the Fed, the ECB would make a mistake and hike rates before the end of the year.
The yield curve of the Eurobond has demonstrated that there will be no rate hike in 2022 since yesterday. As a result of the overall market’s worry, the Euro has already moved. Even the Federal Reserve can claim that it is being postponed for now. Perhaps one rate hike in March, followed by a statement that they will “wait and see.”
It will be interesting to see what Putin does; if there is an attack, the market will become so volatile and unpredictable that the Fed will not tighten at that time, instead of announcing a postponement.