© Shutterstock Top 3 central banks set to raise rates again in May
Invezz.com – Frustration is the name of the game in the FX space, as FX market volatility plunged to a one-year low. The market simply doesn’t move, making it difficult for speculators to anticipate future moves.
But it could just be the calm before the storm. May arrives and the main central banks are once again in the spotlight, with three in particular:
- Federal Reserve
- european central bank
- bank of england
Federal Reserve
The Federal Reserve led the way for other central banks in developed markets and embarked on the most aggressive monetary policy tightening cycle in four decades. Many have said the Fed will hike until something snaps, and in March, the US regional banks were put to the test.
But while the risk of a hard landing is considerable and growing, the Fed is likely to make another 25bp rate hike in May. The question is, what will he signal from then on? Rumors in the market are that the Fed will pause for six months before applying the first rate cut. Therefore, the 25bp rate hike expected in May could just be a modest hike.
european central bank
Another developed market central bank that rose 25bp in May is the European Central Bank. The difference here is that the ECB will not hit its terminal rate in May; therefore, more increases are expected.
Therefore, the is a dip buy, which is why the exchange rate was so resilient.
bank of england
Inflation is in double-digit territory in the UK, making it difficult for the Bank of England to end the current tightening cycle. Therefore, investors expect another 25bp rate hike in May, followed by a pause.
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