US, EU central banks hike rates as markets see looming pause

US, EU central banks hike rates as markets see looming pause

KUWAIT: In the US, the manufacturing sector grew rapidly, with the latest flash manufacturing PMI coming at 49.0 from 46.3 previously, and beating the expected figure of 46.1. Services, on the other hand, slowed down reaching a figure of 52.4 from 54.4 previously. The slowdown in the services sector is seen as a sign of relief for the Fed, who are anxious to see activity cool to lower inflation.

Federal funds rate

The Federal Reserve delivered a unanimous 25bps hike taking the fed funds rate to a target range of 5.25 percent -5.5 percent, in line with market expectations.  Fed Chairman Jerome Powell stressed that inflation “has a long way to go” before reaching the Fed’s 2 percent target. Powell added, “It’s certainly possible that we will raise funds again at the September meeting if the data warranted.” In their policy statement, the Fed asserted that they “will continue to assess additional information and its implications for monetary policy.”

Markets are currently pricing in an 80 percent probability of a pause at the September FOMC meeting. Upbeat GDP The US economy grew more than expected after quarterly GDP growth came in at 2.4 percent versus a 1.8 percent forecast and 2 percent previous