Summary

United States: Everything you need

  • As expected, the FOMC raised its target range for the federal funds rate by 75 basis points for the third consecutive time. The housing market continues to weaken under pressure from rising mortgage rates, while a leading economic credit index points to a broader loss of momentum across the economy.
  • Next Week: Durable Goods (Tue), Consumer Confidence (Tue), Personal Income and Spending (Fri)

International: The Bank of Japan’s policy actions offset each other

  • Apart from the Fed, the central bank that caught the attention of market participants this week was the Bank of Japan (BoJ). As expected, the Bank of Japan left monetary policy settings unchanged; however, the communication surrounding the decision was widely interpreted as dovish.
  • Next week: Central Bank Speakers (Mon-Fri), China PMI (Thu), Eurozone Inflation (Fri)

Interest rate watch: Aggressive Fed policy boosts confidence to fight inflation

  • FOMC at its meeting this week for the third consecutive increase of 75 bps. The FOMC now expects the federal funds target range to rise to 4.4% by the end of this year and to 4.6% by the end of next year as inflation is expected to be more intractable than previously thought.

Credit Market Assessment: Reading the Pulse of the Corporate Bond Market

  • The Federal Reserve Bank of New York’s Corporate Bond Market Distress Index (CMDI) tracks the performance of the corporate bond market using various indicators of the overall market, including investment grade and high yield markets. The latest CMDI release showed that the corporate bond market was in good shape through August.

Topic of the week: Japan intervened in the fight against the rise of the dollar

  • On Thursday, Japan’s finance ministry unexpectedly intervened in currency markets to strengthen the yen for the first time since 1998. The beleaguered yen has fallen more than 20% against the dollar this year, briefly hitting a 24-year low of ¥145. 89 on Thursday after Bank of Japan governors made it clear they plan to keep monetary policy accommodative.

Full report here.

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