The topic of financial instability swung around this week. Recently, with the announcement of measures to deal with bankrupt banks and banks whose stock prices have plummeted, the movement to be cautious about risks has come to a halt for the time being. However, there is no guarantee that such a situation will not occur again in the future, and the situation is not such that the atmosphere is one in which people actively take risks.
Yesterday’s ECB Governing Council implemented a 50bp rate hike as previously announced. It was a measure focused on dealing with inflation. However, due to financial instability, no guidance was given on future monetary policy. Depending on the data, it is a fluid situation where decisions are made each time.
Regarding next week’s US FOMC, the short-term money market is consolidating expectations of 25 basis points. However, market sentiment has fluctuated wildly over the past week or two, from a 50 basis point hike to a no-hold speculation. I would also like to pay attention to weekend reports. Regarding a series of economic indicators, the surprise that the US economic indicators in March are too strong like February is fading.
However, while the ECB was able to push inflation measures to the forefront, the FOMC has two missions: inflation and employment. Fortunately, the current US labor market is doing well, but since inflation is not the only factor, the US may become more sensitive to negative sentiment such as financial instability. Until just before, various observations are likely to emerge.
Assuming that the direction of the USD will continue to be unstable, we plan to respond flexibly.