The Federal Reserve's signal from the United States last night (Wednesday) regarding interest rate hikes starting in March did not surprise investors as they had expected it.
What nevertheless caused a change in the trend in the markets are the hints of the US Governor, Jerome Powell, regarding the intensity of the change in monetary policy.
In a speech after the announcement of interest rates, Powell said that the US economy no longer needs a high level of monetary support (low interest rates and bond-buying bonds), and that interest rates can be raised without hurting the labor market.
At this point, in line with expectations, the interest rate remained unchanged at 0% -0.25%.
Beyond that, Powell reiterated that US inflation is well above the 2% target per year, which affects the cost of living in the country. However, he added that he believes inflation will start to fall when supply problems are resolved. Recall that US inflation is already Reached a level of 7% - a record of 40 years.
Will there be an impact on Israel?
Despite inflation, in Israel it is significantly lower than in the United States, and stands at "only" 2.8% in the past year. In December, it reached a peak of 12 years and apartment prices rose at a double-digit rate, but so far the Bank of Israel has completely refrained from investing because the shekel interest rate will rise soon.
Guy Beit Or, Psagot's chief economist, told Israel Today that last night the Fed signaled most clearly that it was facing more significant interest rate hikes, with Fed members also intending to begin the process of dramatically reducing the huge balance sheet since the crisis began. .
"The Fed's intentions to raise interest rates, together with the change in the direction of other central banks around the world, are also likely to affect the Bank of Israel, which has already begun to hint at the recent interest rate decision, but the messages were still relatively vague. "The significant change in the Fed's direction is expected to lead the Bank of Israel to signal to investors a rate hike in the coming months in a much clearer manner.
The Nasdaq, Photo: AP
Moody Shafrir, Mizrahi Tefahot's chief strategist, also estimates that "US interest rate hikes will eventually also support interest rate hikes in Israel in 2022, although at a much slower pace since, unlike the US, inflation in Israel is still on target."
In light of Powell's remarks, US indices erased the gains recorded at the start of trading and closed in a mixed trend.
The stock exchanges in Asia closed down by up to 2%, and in Tel Aviv trading opened after the implementation of the "English opening" procedure.
Recall that the "English opening" procedure, which means delaying the opening of trading by a few minutes, is activated when supply and demand data indicate a fluctuation of more than 2.5% in the opening of trading.
As of this moment, the declines in the Beit Ahuz have moderated - the Tel Aviv 35 Index is down 0.8%, and the Tel Aviv 135 Index is down 0.6%.
This is after they dropped in the opening of trading by about 2%.
Opportunity to buy?
"Trading on the stock exchanges is characterized by high volatility, as we are in the period of the beginning of interest rate hikes and company reports for the fourth quarter of 2021," says Roni Gitlin, director of the foreign securities trading room at Bank Leumi, in an interview with Israel Today.
He said, "The big story is the interest rate announcement in the United States yesterday, when US Governor Powell delivered a very hawkish speech, showing that he is not thrilled by the recent declines in the markets, and he even stressed the need for many interest rate hikes, including halting the bond purchase program in March.
"All of this caused a reversal in the indices yesterday. The Nasdaq index opened yesterday with an increase of 3%." Investors are afraid of many interest rate increases. "
Meanwhile, Gitlin added: "But in every crisis there is the opportunity, and a 10 percent drop in the leading indices allows for cheaper buying opportunities and many stocks have become more attractive at the current price."
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