Weekly Digest: Fed, SNB Rate Hikes, U.K. Inflation Surprise


4 minutes read

Mar 24, 2023

The front side of the Swiss National Bank building

25/03/2023: The U.S., Swiss, and U.K. central banks raise interest rates amid the banking sector turmoil, U.K. inflation makes an unexpected comeback, Xi visits Moscow for bilateral talks with Putin. And more.

💡Quote of the week

“Financial stability is an integral part of their (central banks') mandates. That should translate into resisting the temptation to keep hiking until something breaks — but it’s already too late.” Marcus Ashworth, Bloomberg Opinion Columnist

Investment news

The Federal Reserve building

🇺🇸 🏦 Caught between inflation and banking crisis. The Federal Reserve raised interest rates by a quarter percentage point, signaling that hikes are coming to an end. (CNBC)

Despite its ninth hike since March 2022, the Federal Open Market Committee noted that future increases are not guaranteed and will depend on incoming data.

🇨🇭 🏦 Banking crisis on halt. The Swiss National Bank raised its benchmark interest rate by 50 basis points on Thursday, taking it to 1.5%, despite the recent turmoil in the country’s banking sector.

The new rate hike comes as Swiss inflation remains well above the Swiss National Bank’s target of between 0% and 2%.

According to a new forecast from the Swiss National Bank, inflation will average 2.6% in 2023, 2% in 2024, and 2.1% by 2025.

🇬🇧 Inflation surprises. U.K. inflation unexpectedly jumped to 10.4% in February, as food and energy bills continued to rise, placing further pressure on households. (BBC)

“The largest upward contributions to the monthly change in both the CPIH and CPI rates came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels,” the U.K. Office for National Statistics said.

🇬🇧 🏦 Pressured to raise rates again. The Bank of England increased interest rates by 25 basis points, in response to persistently high inflation and banking system concerns. (CNBC)

Bank officials explained that much of the unexpected strength in core goods prices in Wednesday's report could be attributed to volatile clothing and footwear prices.

⭐ Gold drifts higher. The gold price rose for a second straight session on Thursday, boosted by a slide in the U.S. dollar and Treasury yields after the Fed signaled monetary tightening might be coming to an end.

Spot gold increased by 0.7% to $1,982.89 per ounce, while U.S. gold futures gained 1.7% to $1,981.70.

📈 Stocks bounce back. The Dow Jones Industrial Average rebounded Thursday after losing 500 points as investors bet the Federal Reserve was done raising interest rates. (CNBC)

The Dow Jones Industrial Average added 403 points, or 1.2%, while the S&P 500 went up 1.5%, and the Nasdaq Composite advanced by 2.4%.

🎢 Slippery slope. Fed Chair Jerome Powell said the U.S. banking sector remained strong, but recent bank failures could cause ripple effects that slow down the economy. (CNBC)

“Financial conditions seem to have tightened, and probably by more than the traditional indexes say. ... The question for us though is how significant will that be — what will be the extent of it, and what will be the duration of it,” Powell said.

📸 Image of the week

a meme mocking the government blaming banks nad investors for starting the 2008 financial crisis


A picture of a metal bitcoin

🤔 Bitcoin at $100,000? Insiders say the cryptocurrency could hit a new record this year. (CNBC)

“I think bitcoin probably breaks all-time highs this year,” Marshall Beard, chief strategy officer at U.S.-headquartered cryptocurrency exchange Gemini, said, adding that the $100,000 price figure is an “interesting number.”

Bitcoin would need to rally around 270% to hit $100,000.

What else is happening

A picture of French police at a nationwide pension strike

🇫🇷 France’s bitter pension battle. French demonstrators angry with President Emmanuel Macron and his plan to raise the pension age blocked access to an airport terminal, sat on train tracks, clashed with police, and threw projectiles at a police station on a 9th day of nationwide protests. Macron said he won’t budge on the pension law. (Reuters)

The majority of voters oppose extending retirement age to 64 by two years, according to polls.

"Do you think I enjoy doing this reform? No. But there are not a hundred ways to balance the accounts ... this reform is necessary,” Macron said in a TV interview.

🇷🇺 🇨🇳 Ukraine peace settlement and pipelines. Russian President Vladimir Putin hosted Chinese President Xi Jinping for a two-day summit in Moscow this week. A deal on a new gas pipeline, possible Ukraine peace plan, and the Sino-Russian ties were among the key topics. (Reuters)

The bottom line: China aims to establish itself as a mediator in the Ukraine crisis while negotiating useful deals with Russia based on its strong bargaining position.

And finally…

asteroid Ryugu containing two organic compounds critical for life
Source: Reuters

Space oddity. Samples recovered from the asteroid Ryugu contain two organic compounds critical for life, reinforcing the theory that some ingredients essential for life may have arrived on Earth on rocks from space billions of years ago. (Reuters)

"Our key finding is that uracil and niacin, both of which are of biological significance, are indeed present in extraterrestrial environments and they may have been provided to the early Earth as a component of asteroids and meteorites. We suspect they had a role in prebiotic evolution on Earth and possibly for the emergence of first life," said astrochemist Yasuhiro Oba of Hokkaido University in Japan.


See you nex week!


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