Moneycontrol Pro Panorama | Rate hikes set to slow?

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On Wednesday, the Bank of Canada’s smaller-than-expected rate hike of 50 basis points and its statement that the tightening phase is getting closer fuelled speculation on whether other central banks would follow suit.

The European Central Bank (ECB) that is scheduled to meet today, is expected to hike bank rate by 75 bps, as it continues its battle against surging inflation. Meanwhile, the rally in US equity markets in the last few sessions seems to be pricing in a lower peak rate of the US Federal Reserve. However, a Reuters poll indicated that there could be a 75 bps rate hike next week.

To be sure, rate hikes are likely to continue as nowhere is inflation in the comfort zone of central banks. But there is a lurking fear that overtightening could tip economies into recession. In this article, Manas Chakravarty writes that doubts are emerging in all countries on the pace and extent of rate hikes.

Politicians want the pace to slow while economists are divided in their views. The Monetary Policy Committees of Australia and the United Kingdom show a divide between hawks and doves. Although inflation is surging, perhaps there is reason to believe that a pause is important to consider the impact of aggressive rate hikes taken so far.

As if this uncertainty isn’t enough, there are concerns about the direction of economic and trade policies in the UK and China under the new leadership. If China’s President Xi Jinping is prioritising security over the economy, UK’s Prime Minister Rishi Sunak has warned of tough measures to bring the faltering economy back on track.

All this and more are likely to keep equity and financial markets jittery for some quarters. An MSCI index of Emerging Market stocks has slumped about 30 per cent since early January, reflecting a punishing rout in markets ranging from China to South Korea. An interesting read from FT (free for MC Pro subscribers) tells us of diametrically opposite views on economic recovery by two of Wall Street’s biggest banks.

Investing insights from our research team

VIP Industries Q2: Why this is a must have stock in the shopping bag

Mphasis: Slow growth in Q2FY23, but this IT player’s valuation is a pull

Ambuja Cements: Q3 on expected lines, but concerns remain

Indian Energy Exchange: Earnings, reasonable valuation the key draw

Dixon Technologies Q2: Superb growth perfectly priced in

Metro Brands Ltd: Strong results, recent acquisition to add value

What else are we reading?

Sunak’s success should make Indians introspect, not rejoice

How monetary policy triumphed over fiscal policy in the UK crisis

China’s steel industry is giving out negative signals

Dabur’s Badshah acquisition marks expensive spice detour

Start-up Street: Establishing Product Market Fit in new businesses

The UK’s share of the world economy has been steadily shrinking

Close fight in Himachal Pradesh election, with AAP as the X-factor

China: Leadership question settled, markets sceptical

What Rishi Sunak’s rise can tell Congress in India

In the rush to switch to EVs, it is important to focus on clean electricity

Technical Picks: BSE, UCO Bank, Tech Mahindra, Tata Chemicals and Crude oil (These are published every trading day before markets open and can be read on the app).

Vatsala KamatMoneycontrol Pro​