On Monday, there was a significant attack by Hamas against Israel, prompting Israel to declare war on Hamas. This led to a decrease in equities, an increase in bonds, safe haven currencies, gold, and crude oil. However, these movements were short-lived as long as the conflict doesn’t escalate further. The European Central Bank (ECB) member, Kazaks, suggested a pause in rate hikes, asserting that future rate hikes would be relatively small. Another ECB member, de Guindos, believes that the current interest rates are sufficient to bring inflation back to target. Fed member, Logan, emphasized the rise in long-term yields as a potential tool for the Fed without requiring additional rate hikes. Jefferson, also from the Fed, remains cautious due to the uncertainty surrounding the economic outlook. Mann, from the Bank of England (BoE), warns about the risk of inflation expectations de-anchoring if inflation remains high for too long. On Tuesday, ECB member Villeroy stated that further rate hikes are not warranted at this time. The Bank of Japan (BoJ) is considering raising their Core CPI target in an effort to combat persistently high core inflation. China is considering new stimulus measures to boost their economy. The US NFIB Small Business Optimism Index came in lower than expected. Fed members Bostic, Kashkari, and Daly all have differing views on the need for additional rate hikes and the impact of long-term yields. The New York Federal Reserve reported consumer inflation expectations for various time frames.
