Financial markets have been extremely volatile in the last couple of weeks, as all of a sudden, investors realized central bank officials still have the ability to surprise them.
After years of inaction, the Bank of Japan hiked interest rates by 15 basis points , and Governor Kazuo Ueda delivered a hawkish speech in which he mentioned that interest rates were still “low.” The Japanese Yen soared with the news and put the US Dollar under selling pressure, as the American currency was already struggling following a batch of weak macroeconomic figures that spurred concerns about growth in the world’s largest economy.
Also, the well-known hawk, Minneapolis Fed President Neel Kashkari, said that the balance of risk has shifted, adding that “the debate about potentially cutting rates in September is an appropriate one to have.” At this point, it seems there won’t be any surprises from the Fed when it meets next month. But is that so? Fears of a potential recession have fueled speculation for a loosen monetary policy. However, as said before, the US economy has proved resilient.
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