End of wage hikes, beginning of recession? What will the week bring?

Last week we witnessed the monetary decisions of the two major central banks. The Federal Reserve, as expected, raised interest rates by another 25 bps on Wednesday, and a day later EBC followed suit by setting the deposit rate at 3,25%. Friday's data from the US labor market turned out to be exceptionally strong, which may put the Fed in a difficult situation. Was the US interest rate hike in May the last in this cycle? How will the market react to such a scenario?

What about further rate hikes by the Fed?

Investors and analysts remain divided over the current cycle of Fed rate hikes. Some have been waiting for a long time pivot, others warn of imminent trouble caused by drastic rate hikes. Situations in which the Fed ended a longer (at least 365-day) and consistent (meaning an increase in interest rates by at least 400 bps) cycle of hikes occurred only a few times. The last time it happened was in 2006 - just before the outbreak of the global financial crisis. Is the end of the cycle of interest rate increases Fed heralds the coming recession?

In the 70s, the Fed sharply raised interest rates in response to the oil shock, leading to deep recession and stock market declines. However, in this case it is difficult to clearly determine the turning point in the cycle due to the reduction and then the pause in 1973. It is worth remembering, however, that Jerome Powell often referred to this case, pointing out that the rapid interest rate cuts in the years 74-75 were a mistake, which The Fed is not going to repeat it now.

An often cited example today is the dot-com bubble, when the end of the cycle of interest rate hikes coincided with a peak in the markets. At that time, the first interest rate cut was the seal of a powerful slump. Will it be the same this time?

In today's webinar you will learn:

• Fed raises rates for the last time - what does this mean for markets?
• Problems of US banks… who's next?
• Macro data - strong labor market, weak industry

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

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