Investment Institute
Weekly Market Update

Take Two: Fed raises rates and signals one further hike, ECB says outlook blurred by banking woes

  • 27 March 2023 (3 min read)

What do you need to know?

The US Federal Reserve (Fed) raised interest rates by 25 basis points (bp) to 4.75%-5% and continued to signal one further hike despite continued uncertainty around the banking sector turmoil. The central bank indicated one further rate increase is likely in 2023, shifting from the previous guidance of “ongoing increases” for the first time in a year. Fed Chair Jerome Powell said the collapse of Silicon Valley Bank did not represent broader weakness in the banking system, which he described as “sound and resilient”. He added though that recent events were likely to result in tighter credit conditions, which could have “a significant macroeconomic effect,” and stated that this expectation had resulted in the Committee not signalling even more hikes ahead.

Around the world

Inflation remains a key concern for central banks. European Central Bank (ECB) President Christine Lagarde indicated the ECB will take a “robust” approach to future rate-setting and remain ready to act as it awaits “clear evidence that underlying inflation is trending downwards”. However, Lagarde acknowledged banking sector upheaval has made the outlook “blurrier”.  Meanwhile the Bank of England raised its policy rate by 25bp to 4.25%, as anticipated, while UK annual inflation unexpectedly increased for the first time in four months, to 10.4% in February from 10.1% in January, largely driven by rising food costs.

Figure in focus: $3bn

The International Monetary Fund (IMF) approved a $3bn loan for Sri Lanka, in an attempt to “restore macroeconomic stability and debt sustainability” within the country. Through its Extended Fund Facility mechanism, the IMF will initially disburse $333m, with more to follow over the coming months. Sri Lanka has long been engulfed in a financial crisis, characterised by unrest and chronic shortages of basic goods, after foreign exchange reserves plummeted. The IMF said the four-year arrangement is expected to catalyse financial support from other development partners to help “unlock Sri Lanka’s growth potential” and aid its recovery.

Words of wisdom:

Sustainable Aviation Fuel: A biofuel that has similar chemical properties to conventional aviation fuel but with potentially sharply lower greenhouse gas emissions. Sustainable Aviation Fuels (SAFs) are currently relatively costly and hard to come by, but some airlines have purchased large orders and one carrier has earmarked a small part of every ticket sold to help cover the extra costs. The fuels can be made using cooking oil, municipal waste or woody biomass, and one report last week suggested the European Union is considering setting SAF usage targets from 2030 for any airline seeking to receive a green label.

What’s coming up

The closely watched Ifo Business Climate index is published Monday. The German measure hit an eight-month peak of 91.1 in February, from a downwardly revised 90.1 in January. The latest S&P/Case-Shiller US Home Price benchmark lands on Tuesday while Thursday sees a wave of Eurozone opinion measures released, including the latest Economic, Services and Industrial Sentiment indices. A final estimate for fourth quarter US GDP growth is published Thursday and the Eurozone announces flash inflation data for March on Friday; February saw the bloc’s Consumer Price Index fall to 8.5% on annual basis, its lowest since May 2022.

Related Articles

Weekly Market Update

Take Two: European Central Bank and Bank of Canada cut interest rates

  • by AXA Investment Managers
  • 10 June 2024 (3 min read)
Weekly Market Update

Take Two: Eurozone inflation edges back up; IMF raises China’s growth forecast

  • by AXA Investment Managers
  • 03 June 2024 (3 min read)
Weekly Market Update

Take Two: US stocks hit fresh highs; ECB confident inflation is under control

  • by AXA IM Investment Institute
  • 27 May 2024 (3 min read)


    The information on this website is intended for investors domiciled in Switzerland.

    AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.

    This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.

    AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.

    The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.

    Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.

    AXA Investment Managers Switzerland Ltd.