The tug-of-war between the bulls and the bears isn’t just confined to punters in stocks. This week, it spilled over to central bankers as well. US Fed Chair Jerome Powell made sure in his press conference that the markets got his hawkish message. He said, “Incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.” Bank of England chief Andrew Bailey, on the other hand, explicitly said further increases in the Bank Rate would be to “a peak lower than priced into financial markets’’. Both central bankers hiked their policy rates by 75 basis points each, but their messages to the market were very different.
Faced with conflicting signals, this FT story titled ‘How to be Bullish?’, free to read for Moneycontrol Pro subscribers, listed the reasons for being bullish on global markets, while another piece, titled, ‘How to be a Bear’, laid out the bear case. My colleague Anubhav Sahu cut through the fog to write about the implications of Powell’s ‘’higher for longer’’ policy stance and what investors in India should do now.
‘’Slower, longer, higher’’ sums up Powell’s stance on rate hikes nicely. Its sobering conclusion: “Restrictive monetary policy—however gradually delivered—slows the economy, squeezes margins, and increases bankruptcies and defaults.”