RBA and BoE tipped to hike this week while ECB holds at 2.5%
In short
- The RBA decides on Tuesday: 31 of 32 economists expect a hike to 4.85%. The Bank of England decides on Thursday at 7:00 a.m. Eastern; markets expect a rise from 3.75% to 4%.
- The ECB stays at 2.5% and is not expected to join the hikes; the Fed has a 72% chance of a hike in December, and Governor Logan wants at least two more.
- At 7:00 a.m. Sofia time the euro is worth $1.1172; the DAX fell 0.85% on Friday and the Euro Stoxx 50 1.22%.
Central banks around the world are raising rates this week, while the ECB holds at 2.5%. For US investors the key question is how the Fed fits in: futures give a 72% chance of a hike in December.
What happened
The RBA decides on Tuesday; according to investingLive, 31 of 32 economists polled expect a hike to 4.85%, with only Deutsche Bank expecting a hold. The Bank of England announces its decision on Thursday at 12:00 UK time (7:00 a.m. Eastern) alongside its quarterly report. Acorn Finance puts Bank Rate at 3.75%, and The British Eye reports that a rise to 4% is expected. MarketScreener adds that markets expect a hike from the Riksbank too, while Norges Bank is seen on hold.
The ECB held its rate at 2.5% last Thursday. At the Fed, investingLive reports that Governor Logan said at least two more quarter-point hikes are needed; futures price a 72% chance of a hike in December.
European shares ended Friday lower: the DAX closed at 25,818 (−0.85%), the Euro Stoxx 50 at 6,131 (−1.22%) and ASML fell 6.1%. This morning’s futures are little changed (Eurostoxx +0.1%, DAX flat). Interest-rate gaps between central banks tend to move exchange rates; the euro is at about $1.12.
What it means for you
The math: on a $100,000 variable-rate loan over 25 years, a rate of 7.00% means payments of about $706.78 a month. At 7.25% they are $722.81 – $16.03 more every month, or about $4,810 over 25 years. This is an illustration of what a quarter-point does, not a forecast for your own loan.
See also: live stock market prices and gold prices in the US.
Bottom line
The RBA and the Bank of England are expected to raise rates this week, while the ECB stays at 2.5%. In the US, markets give a 72% chance of a Fed hike in December.
Sources: MarketScreener · investingLive · Acorn Finance · The British Eye
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