Financial Markets Daily Report17 February 2023
Volatility and precaution continued to set the tone yesterday, with investors digesting hawkish messages from FOMC officials and hotter-than-expected PPI inflation data in the US (+0.7% m/m in January, the largest gain since June).
- Volatility and precaution continued to set the tone yesterday, with investors digesting hawkish messages from FOMC officials and hotter-than-expected PPI inflation data in the US (+0.7% m/m in January, the largest gain since June).
- Loretta Mester (Cleveland Fed) said that the incoming data suggested the central bank will need to bring the Fed funds rate above 5%, adding that the central bank could even accelerate the pace of rate increases again if needed.
- By contrast, ECB Chief Economist Philip Lane and GC member Fabio Panetta said the increases in policy rates had yet to work their way through the economy, urging for "an open mind" and a "measured approach" to future moves.
- In this context, stocks fell notably in the US while bond yields rose further, with the 10-year Treasury bond yielding at the highest level since the start of the year. By contrast, stocks gained across Europe while sovereign bond yields were broadly unchanged. The USD also appreciated further against peers.