European stock markets traded higher on Friday as the market awaits Federal Reserve Chair Jerome Powell’s widely anticipated speech in which he could indicate the central bank’s plans to deal with inflation and rising interest rates.
UK’s FTSE 100 rose by 0.4% early Friday, and the DAX in Germany and CAC 40 traded 0.3% higher.
Investors are awaiting Powell’s speech at the Jackson Hole Symposium at 2 pm to see how Fed plans to control interest rates amid inflation.
Thomas Costerg, a senior US economist at Pictet Wealth Management, said: “The Fed could start thinking about a pause in rate hikes, potentially for the end of the year, with the argument of giving the economy time to digest. However, it is still too early to talk about (interest) rate cuts.”
In the July Federal Reserve meeting, policymakers indicated that interest rates could not be reduced unless there was a substantial decrease in inflation.
The US economy is dwindling due to high inflation rates, and if not controlled, recent data shows that the world’s largest economy could slide into recession.
These economic concerns are stressing Europe even more. The continent is struggling with soaring energy prices as sanctions on Russia hinder gas imports.
Britain’s energy regulator Ofgem raised its cap on domestic energy bills from £1,971 to a record £3,549, effective 1 October. The amount is expected to go higher in January as demand exceeds dropping and limited gas supplies.
In the wake of these uncertainties, the market eagerly awaits Powell’s speech for clarity; however, “Powell is likely to remain vague on the next few months, but could nevertheless indicate that a modulation of rate hikes is coming”, said Costerg.
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