Finimize - 🇬🇧 Britain got bruised

The Fed struck a compromise | Inflation dashed Brits’ hopes |

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Today's big stories

  1. The Fed compromised, announcing a 0.25-percentage-point hike and hinting we’re close to the peak
  2. It might be time to start worrying about a “Minsky moment” – Read Now
  3. The UK’s inflation data for February showed prices jumped way higher than expected

Treading Carefully

Treading Carefully

What’s Going On Here?

The Federal Reserve (Fed) nudged rates up by 0.25 percentage points on Wednesday.

What Does This Mean?

The Fed usually does its best to signpost coming decisions – so by the time it announces any changes to rates, the market’s normally already quizzing its chairman about his next moves. But with three bank failures over the past few weeks, some have pinned the blame on the Fed's fastest-ever rate-hiking schedule – and that meant there was an unusual amount of uncertainty leading up to Wednesday's announcement.

There were calls from some quarters for the Fed to pause hikes, sit back, and watch how the economy would fare. But only a week or so ago, it was an odds-on bet the Fed would jack rates up by 0.5 percentage points. In the end, then, the central bank compromised, with a smaller rate increase and an acknowledgment that bank failures could impact folk’s ability to borrow. And that admission might mean this rate rise is its last.

Why Should I Care?

For markets: Move fast and (try not to) break things.
The fastest rate-hiking cycle in the Fed’s history was bound to leave some collateral damage. After all, we’re not talking chaos theory here: interest rates and banks are closely intertwined. But the Fed could still be vindicated: if a few smallish bank failures are the price the US pays to tame inflation – and if any incoming recession’s mild – then the central bank could yet emerge as a hero.

The bigger picture: Data dependent.
The Fed’s committed to acting in accordance with the numbers – but the economic figures have been all over the place lately, and that makes depending on the readouts pretty risky. Just look at the UK, where inflation’s staged a sudden and unexpected resurgence. So if the data keeps hopping around, maybe it’s time for the Fed to rethink its dependency on it – and start being a bit more forward-thinking.

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Analyst Take

We Could Be Dangerously Close To A “Minsky Moment”

We Could Be Dangerously Close To A “Minsky Moment”
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

It’s a risk no one wants to think about, and it could be rising

It’s what’s known as a “Minsky moment”, a sudden and severe market correction that follows a period of market excesses and debt buildup. 

That dreaded bust comes after years of boom – and it tends to have wide-reaching consequences for people and the economy. 

That’s today’s Insight: everything you need to know about the Minsky moment and what you can do now to protect your portfolio.

Read or listen to the Insight here


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Britain’s BoE-ling Point

Britain’s BoE-ling Point

What’s Going On Here?

Inflation's got Britain breaking a sweat, with February's numbers coming in hotter than expected.

What Does This Mean?

Bank of England (BoE) workers were probably trudging to the office after catching a glimpse of the latest UK inflation digits: turns out, prices jumped by 10.4% in February compared to last year, outdoing the 9.9% forecast and reversing the recent cooldown. And core inflation – which leaves out energy costs and all the stuff Brits dig (like food, tobacco, and booze)  – climbed 6.2% (tweet this), also outstripping economists' predictions. A closer look shows there really isn’t much to feel warm and fuzzy about: only the annual price hikes for furniture, transport, and recreational activities cooled down in February – everything else outpaced January's numbers.

Why Should I Care?

Zooming out: Give me a break.
When the BoE said inflation would probably near its 2% target by the end of summer, most folks figured that meant the bank would soon hit pause on its rate-hiking moves – or even reverse them. But if scorching inflation digits keep coming, the bank's going to have to toss its medium-term plans out the window and keep jacking up rates. And that could drag the specter of a nasty recession – which the UK seemed to be dodging – back into the spotlight.

For markets: No sure thing.
Sure, British inflation and the US’s mini-banking crisis – which has prompted calls for the Federal Reserve (the Fed) to halt rate hikes soon – should see the pound continuing its recent muscle-flexing against the dollar. That’ll ease at least some inflation pressure for the import-thirsty UK. But be wary of pinning too many hopes on the ever-changing FX markets: only six months ago, the pound was heading towards parity with the dollar in what seemed like a “one-way bet,” but now dollar weakness seems to be the consensus view. The lesson: these things are never as certain as they seem.

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💬 Quote of the day

“My definition of a free society is a society where it is safe to be unpopular.”

– Adlai Stevenson (an American statesman)
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🎯 On Our Radar

  1. Oh bother. Hong Kong shut down another Winnie The Pooh film – and Xi Jinping might know why.
  2. Airbnbust. Owners are panicking now the homestay market is on a knife-edge.
  3. The snail mystery. How such slow-moving creatures spread so far is a genuine conundrum.
  4. “That’s hot.” There’s more to Paris Hilton than meets the eye.
  5. Credential inflation. Some jobs don’t need college degrees – so let’s stop insisting on them.
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