The US Fed has decided to take a more aggressive stance in its monetary policy, but not everyone is happy about its moves. The Fed first decided to raise rates as part of its restrictive measures against inflation and according to Wednesday’s minutes of March, we will probably see a reduction of the balance sheet by up to $95 billion starting from May.To get more news about fusion markets, you can visit wikifx.com official website.
However, the Fed has been late in both reducing the balance sheet and raising rates and ultimately is now trying to chase inflation that might be already out of control. Today’s inflation is not solely the fault of the Fed, as government fiscal policy, broken supply chains during the pandemic, and the current conflict in Ukraine have all had an impact. But the Fed could have intervened much earlier, as it has several times in the past. However, concerns about prolonged slow growth eventually led to the zero interest rate policy extension.
The problem is that when the conflict in Russia and Ukraine has rapidly increased energy prices and the US economy is showing signs of a possible impending recession, raising rates too quickly may be another central bank misstep. Moreover, given the sustained low rates in recent years, debt levels in the economy are much higher than usual, and rates of around 5% or more would harm the entire US economy.
A closely watched event in Europe was the presidential election in France, where there was ultimately no big surprise. The incumbent President, Emmanuel Macron, defeated the leader of the far-right National Assembly party, Marine Le Pen, by a few percentage points in the first round, and both will now go through to the second round. However, unlike in 2017, the second round results, which will take place in two weeks, could be much closer. A possible, though unlikely, victory for LePenn could then be a significant problem for France and Europe as a whole.
The stock markets have had another negative week. On Wednesday, the markets lost ground following the release of minutes from the Fed’s mid-March policy meeting. In particular, titles in the information technology, communication services, and consumer discretionary stocks sectors underperformed. On the other hand, defensive sectors like consumer staples and health care sectors recorded solid gains.
Stocks in Europe, somewhat surprisingly, rose as a whole, with the STOXX Europe 600 index posting a weekly gain of 0.57%, mainly to Friday’s substantial gains. The UK’s FTSE 100 index (+1.75%) also ended in profit, but French (CAC 40 -2.07%) and German stocks (DAX -1.13%) lost ground.