Waiting for FED decisions

Rate decision and guidance from Powell next week

WHAT HAPPENS
At the FED meeting on Wednesday February 1, the US central bank is expected to raise rates by 0.25%, a decision which may be followed by one or two other small hikes. In general, the markets expect that between May and June of this year the FED will cease its rate hike policy.
However, rates may remain high for a long time, longer than what the markets expect, above all because in the second half of the year there are concrete expectations of a recovery in the cost of raw materials with a consequent impact on inflation. This scenario prevents any central bank from hypothesizing a rate cut.
Furthermore, there is the full return of Chinese operators to the international scene after 3 years of lockdown, with an important demand potential for raw materials.

WHAT TO EXPECT
The Fed's words should not lead to any particular surprises for the markets. The data on inflation and personal consumption confirm an easing of pressure on prices and therefore the need for further substantial increases in interest rates by the Fed.
In the absence of important warnings, it is therefore probable that the equity sector will react positively, at least in the short term.
However, it should not be forgotten that from the second half of February the corporate reports on the profits of listed companies will begin, and a possible disappointment in investors' expectations could plunge the stock indexes back into the depressive spiral from which they are trying to get out. In this sense we have already mentioned elsewhere that important economic indicators such as the LEI are clearly anticipating a recession.