There is a growing possibility that the U.S. benchmark interest rate will rise by 0.50 percentage points at a time. As supporting the market's expectations, the Federal Reserve (Federal Reserve) has begun to argue for big steps one by one. On the 25th (local time), John Williams, president of the Federal Reserve Bank of New York, argued in a public speech that the Fed should raise its key interest rate by 0.50 percentage points when appropriate.
At the Fed's Federal Open Market Committee (FOMC) meeting, which ended on the 16th, a minority opinion was also presented claiming a 0.50 percentage point increase. The only person who claimed the big step at the time was James Blood, the president of the St. Louis kite. However, discussions on the possibility of a big step have become more active since the Fed raised interest rates by 0.25 percentage points at the last meeting.
Market watchers predict that the Fed is likely to take big steps one after another at the FOMC meeting in May and the following month's meeting. Furthermore, many predict that the key interest rate will continue to rise in the remaining four FOMC meetings since June. According to this expectation, the U.S. benchmark interest rate will rise to at least 2.25 to 2.50% by the end of this year.
Citigroup predicted that the Fed would raise its key interest rate by 0.50 percentage points in a row at the upcoming FOMC meeting in May, June, July and September, predicting that it may raise the key interest rate by 0.75 percentage points at one time. If this prediction is correct, the top of the U.S. benchmark interest rate will rise to 3.25% this year. The dot chart released by the Fed shortly after the last monetary policy meeting also contained a member predicting that the benchmark interest rate could rise to 3.25% by the end of this year. However, the claim did not draw much attention when the dot chart was released.
However, the New York stock market seems to have gotten used to this prospect. Major indexes on the New York Stock Exchange have been on a modest rise over the past two weeks. Some analysts say that more and more people think it is an opportunity to invest now because the stock market has been in a slump for a long time. In the meantime, there are many predictions that stock prices will be differentiated by stocks amid a gentle rise.
Han Ji-young, a researcher at Kiwoom Securities, predicted, "As there are no signs that companies' profits are falling into a slump in both the Korean and U.S. stock markets, the negative sensitivity to interest rate hikes will gradually ease."
Kim Young-hwan, a researcher at NH Investment & Securities, also predicted a modest rise in the index, calling for attention to stocks related to the conversion of Endemic (meaning that the disease is a endemic disease after the COVID-19 pandemic) and growth stocks that fell relatively less.
On the other hand, researcher Noh Dong-gil of Shinhan Financial Investment predicted on the 28th that the KOSPI's profit rate will continue to decline for the time being due to rising oil prices following the Ukraine crisis. He pointed out that the U.S. monetary policy may not be a material to expand stock market adjustment, pointing out that the KOSPI does not rise significantly despite easing uncertainties in monetary policy.
Despite the Fed's interest rate hike, concerns over global stagflation still remain. One reason is that international oil prices and grain prices are on a high march due to the prolonged war between Russia and Ukraine. Nevertheless, the Fed is trying to continue its austerity drive based on confidence in the U.S. economic recovery.
However, the Fed is expected to try to control the pace by paying attention to major economic indicators in the future. What is immediately drawing attention is employment and price-related indicators released this week. The first is the March ADP employment report, which will be released on the 30th. According to a report by the Wall Street Journal (WSJ), the number of new employees in the non-agricultural sector is expected to be about 460,000 in March. This is far below the previous month's tally of 678,000. However, experts believe that the Fed will aggressively raise interest rates if the employment growth in March is confirmed to be around 500,000.
On the 31st of this month, the core personal consumption expenditure (PCE) price index for February will be released. The core PCE index is a price index that the Fed values. The index stood at 5.2 percent in January. The prevailing view is that the index in February would have risen further than this. The market consensus is around 5.5%.
If the figure exceeds market expectations, the Fed is more likely to raise its key interest rate by 0.5 percentage points at the next FOMC meeting.
Meanwhile, the KOSPI started trading at 2721.22, 8.76 points (0.32 percent) lower than the previous day, and continued to fluctuate. The closing price was recorded at 2729.56, down 0.42 points (0.02%) from the previous day.
