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Weekly Market Analysis 18 December 2023

by Buse Kozok
Weekly Market Analysis  18 December 2023

We followed US inflation last week. Interest rate decisions of the US Federal Reserve (Fed), Bank of England (BoE) and European Central Bank (ECB) were also among the data we followed. While the consumer price index in the USA increased by 0.1% monthly in November, annual inflation, which was 3.2% in October, decreased to 3.1% in November. In the last meeting of the year held on Wednesday, the US Federal Reserve (Fed) kept the policy rate unchanged at 5.25-5.50%, the highest level in 22 years, in line with market expectations. Fed Chairman Powell stated that inflation has slowed down but is still high, and that the possibility of an additional interest rate increase is not completely off the table, and that the timing of the interest rate cut is being discussed. According to the Fed's economic projections, the bank predicted three interest rate cuts for 2024. The Bank of England (BoE) did not change the policy rate in line with expectations and left it constant at 5.25%, the highest level of the last 15 years. In the decision text, it was reiterated that an interest rate increase may occur again if there is evidence of more permanent inflationary pressures. The European Central Bank (ECB) decided to shrink its balance sheet faster, while keeping the interest rates unchanged as expected, keeping the refinancing rate at 4.50%, the deposit rate at 4% and the marginal funding rate at 4.75%. While ECB President Lagarde stated that they depend on data, not time, for interest rate cuts, she stated that they did not discuss interest rate cuts. Risk appetite increased in global markets after the Fed signaled that it would cut interest rates next year. Gold rose to $2.50 per ounce.

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