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Fed officials boost rate hike calls, say markets got a message

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(Bloomberg) — Federal Reserve officials reiterated Thursday that they will continue to raise interest rates to rein in high inflation, and that markets now get the message.

“If you look at the points, it looks like the committee is expecting a fair amount of additional moves this year,” James Bullard, president of the St. Louis Fed, said at a virtual emerging markets forum, referring to the so-called bank plot. of expectations. “I think the markets have gotten to grips with that and it seems to be the correct interpretation.”

He also said the volatility in financial markets reflected the spillover from recent events in the UK – where the new government’s fiscal measures had sent the pound lower – but made clear that these would not cause the Fed to pause its tightening campaign.

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“We are determined to get to the right policy rate level in order to put meaningful downward pressure on inflation here,” he told reporters by telephone after his speech.

“It’s mostly about financial markets needing to price the volatility you’re seeing in the UK, so we have some moves in the US because of that,” he said. “I don’t see that really affecting US inflation or real growth developments.”

His tough stance was in line with a message from Loretta Meester, president of the Federal Reserve Bank of Cleveland, who said officials were determined in their pursuit of raising interest rates to a level seen as restrictive. Both officials are voters this year on the Federal Open Market Committee that sets the interest rate.

“Real interest rates – judging by expectations over the next year of inflation – should be in positive territory and stay there for some time,” she said earlier in an interview with CNBC. “We are still not even in a restricted area for the interest rate.”

Federal Reserve officials raised interest rates by 75 basis points on September 21 for the third consecutive meeting, raising the target for the federal funds rate to a range of 3% to 3.25%.

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Their quarterly summary of economic expectations, or point chart, shows median expectations for rates of up to 4.4% by the end of this year, implying another 1.25 percentage points of tightening for their remaining November and December meetings.

Meester said her forecast is probably a little above the average path because she sees inflation continuing, based on her conversations with businesses, community development groups and other sources.

“In September, inflation was going down, but we have to raise interest rates to get that downward shift in inflation,” she said, adding that the US economy has so far been able to deal with higher interest rates.

UK Troubles

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She made a distinction between US markets and what is happening in the UK, where the Bank of England announced on Wednesday that it will launch unlimited bond buying to address market dysfunction. She said that when the Fed announced its bond purchases in the early months of the pandemic, it did so at a time when it was also cutting interest rates to support the economy.

Meester said the BoE is having some connectivity issues as it raises rates but needs to buy assets, which are usually seen as a way to ease monetary policy, in order to support financial stability.

“It’s a difficult situation for them,” Meester said. “For reasons of financial stability and reasons of market functions, they had to go in and buy bonds.”

“The performance of the market is very important because you will not be able to achieve any monetary policy targets if the markets are not working,” she said. “This is different from worrying about volatility in the markets.” So far, Meester said, there has been no sign of dysfunction in US financial markets.

(Updates with Pollard’s comments to reporters in fourth paragraph.)

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More stories like this are available at bloomberg.com

© Bloomberg LP 2022

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MicroStrategy is at its lowest level since 2020 after the sales were revealed

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(Bloomberg) — Shares of MicroStrategy touched their lowest level since August 2020 after the enterprise software company, which in recent years has been known as the largest buyer of bitcoin, revealed its first sale of the token.

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The stock fell 1.1 percent to $136.63 on Thursday, down 75 percent this year. Bitcoin rose less than 1% to around $16,590 and is believed to have fallen 64% since the start of the year.

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In a filing on Wednesday, MicroStrategy said it acquired approximately 2,395 Bitcoin between the beginning of November and December 21 through its subsidiary MacroStrategy, and paid out approximately $42.8 million in cash. It then sold 704 of the tokens on Dec. 22 for a total of about $11.8 million, citing tax purposes, before buying another 810 of them two days later.

Matt Malley, chief market strategist for Miller Tabak + Co. Step down as CEO. This news means they don’t seem to want to do that anytime soon.”

Overall, MicroStrategy held about 132,500 bitcoins worth over $4 billion USD as of December 27th. The company paid an average purchase price of $30,397 per bitcoin.

“Given MicroStrategy’s $2.4 billion in leverage, we believe the company may have a lot of leverage over Bitcoin, and may face some liquidity risk,” Jefferies analyst Brent Thiel wrote in a note on Wednesday. Thill has an “underperform” rating on the stock and a price target of $110.

Over the years of the pandemic, MicroStrategy has become well known for its Bitcoin takeovers, largely led by Saylor. Earlier this year, Saylor stepped down from that role and now serves as CEO at the company and continues to lead its bitcoin strategy.

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MicroStrategy was trading around $120 before Saylor first announced the company’s Bitcoin purchases in 2020. The stock reached an all-time high of $1,315 in February 2021.

(Updates to include the stock’s closing price in the second paragraph.)

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Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph

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Former FTX CEO Sam Bankman-Fried is set to appear in court on the afternoon of January 3 to enter a lawsuit over two counts of wire fraud and six counts of conspiracy against him related to the collapse of cryptocurrency exchange FTX, according to Reuters. mentioned on December 28, citing court records. Bankman-Fried will appear before District Judge Lewis Kaplan in Manhattan.

Judge Kaplan was appointed to hear the case on December 27 after the original judge in the case, Ronnie Abrams, Resigned herself because of connections between FTX and the law firm Davis Polk & Wardwell, where her husband is a partner. The company provided advisory services to FTX in 2021.