Recently, stock markets have shown significant fluctuations in response to the decisions of major central banks. The measures taken by the Fed and the Bank of England have a substantial influence on stock indices.
Fed's Decision
The Fed decided to maintain its key interest rates in the range of 4.25% to 4.50%. This decision was not unexpected for the market, however, analysts focused on remarks from Chairman Jerome Powell, who noted increasing risks to employment and inflation, as well as slowing economic growth. Despite the absence of an imminent rate cut announcement, the stock markets reacted positively, as investors continue to anticipate easing monetary policy by September.
Bank of England Cuts Rates
The Bank of England surprised many by cutting its key interest rate by 25 basis points to 4.25%. This decision marked a turning point for stock market investors, particularly amid a slowdown in the UK economy. The bank anticipates economic growth of only 0.75% by 2025 and plans to progressively reduce the key interest rate down to 2.75% by early 2026, while inflation is expected to be at 2.6%, close to the target.
Market Impact
The stock markets reacted positively to these events. The CAC 40 rose by 0.8%, the German DAX increased by 1.1%, and the UK FTSE 100 gained 0.3%. Investors are confident that the Fed will closely monitor economic signals without risking excessive tightening of its policy, while the Bank of England's rate cut has improved investor confidence in the markets.
The differences in the decisions of the Fed and the Bank of England highlight the unique economic challenges facing both countries. Financial markets continue to closely monitor the monetary policy of central banks, which significantly influences stock indices.
