Dubai TV Interview, Dec 13, 2021

Speaking to Dubai TV, Monday, Mohamed Hashad, Director of Research and Development at Noor Capital and member of the American Association of Professional Technical Analysts highlighted major developments in the financial markets this week

The US Federal Reserve
Asked whether the US Federal Reserve Bank might decide six interest rate hikes as market participants anticipate while inflationary pressures increase, Hashad said that inflationary pressures are really sieging the financial markets, in general, and the Federal Reserve, in particular, creating circumstances that could push the Federal Reserve’s next meeting, on Wednesday, to raise interest rates as inflation has reached 6.8, the highest reading in nearly 40 years.

Fed Chair Jerome Powell has been saying over the past months that inflation is transitory and would be back to normal target once the balance between supply and demand is reached, but recent economic data have changed Jerome Powell’s view, put the Fed is in a critical position and will have to raise interest rates in conjunction with a reduction in the asset purchases programme.

Hashad believes that during the next meeting, the Fed will not raise interest rates, and instead, may hint at an accelerated tapering of asset purchases and stimulus in an attempt to end them ahead of schedule next May.

Asked if the Fed would just hint at tapering though inflation is not the only issue on the economic arena, as there exist several other crises including energy prices, Hashad said he believes Fed would indeed be content to hint that since 2020 and the beginning of the Coronavirus pandemic, it has become more and more difficult for any central bank, and even for Jerome Powell and the Federal Reserve to suddenly change the monetary policy in a manner that may shock the markets from a policy that is based upon easing and stimulus by inject more liquidity into markets into a tighter policy with higher interest rates.

While the Fed may hint at the possibility of raising interest rates next year from two to three times and over the next two years it may reach six interest rate hikes as asset purchases continue to be tapered until employment levels are able to reach maximum, and purchases and inflation levels return to central bank targets of -2 to 2%.

European Central Bank
Asked, whether current inflation levels could prompt the European Central Bank and other central banks to change their view on inflation, Hashad said that he believes that the president of the European Central Bank Christine Lagarde, in particular, is fully convinced that inflation will return to normal levels. European monetary policymakers are determined to rule out the option of raising interest rates in the coming period, so we may see a further decline in the Euro as a low-yielding asset or non-yielding currency.

As for the Bank of England, which is facing further pressure, the UK economy barely grew last October, making it the fifth largest economy in the world, barely growing by 0.5% below pre-epidemic levels.

Despite speaking about all the foregoing pressures, however, Hashad does not believe that there will be a dramatic change of the monetary policy by the European Central Bank or by the Bank of England.