There's a lot going on in the US right now...
Hi there,
The Federal Reserve in the US (also know as Fed) had a meeting last week.
One of the focuses this time was actually on the fact that this was the first meeting since the collapse of SVB and merge of Credit Suisse.
So naturally, the world is waiting for their response.
Long story short, they believe it's "too soon" to know how US monetary policy should respond.
Usually, these meetings have us all on the edge of our seats, as when they raise their interest rates — often the RBA follow suit.
Well, the Fed Funds Rate did increase by 0.25% bringing the percentage to 5.0% now.
To make this a little less boring — behold this graph!
That big green line is the Fed.
So the Fed is expecting one more 0.25% rate hike soon and then holding off for the remainder of the year.
The market tells us a pretty different story with those white and purple lines.
Those lines are telling us there are a few cuts to made throughout the second half of this year.
One thing for sure is that the positions of these graphs can literally change overnight!
Even just a few weeks ago, the RBA was delivering much more commentary about continuing with the rate hikes indefinitely.
But now that commentary has tamed since Credit Suisse and SVB hit the headlines.
The 10-year government bond on a day-to-day basis can be one to watch.
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As that drops, it means that the economy is expected to slow and as it rises, inflation and growth in the economy is expected to continue.
We are seeing daily fluctuations on this bond in either direction, which gives you the indication that it's really not clear which way we are headed at the moment.
If we see any more big financial institutions come into these hard times, expect this to drop very quickly and any future chances of more interest rate increases.
Well, I hope this made that little piece of news a little easier to digest.
Finance is full of fancy graphs with a jargon-filled explanations.
But sometimes you just need someone to tell it to you straight.
Ultimately, we always have one eye on the US but as for us Aussies, it's business as usual for now.
Until next time.
Steve.
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