It was a week for focusing on central banks, as we had policy meetings for the Bank of England, Federal Reserve and Bank of Japan. So we ask, as three of the four most influential policy makers (the other being the European Central Bank) converged at a junction last week, what are the signs telling us?
The traffic lights were green for the Bank of England as the Monetary Policy Committee (MPC) raised rates, by a quarter of one percent, to the highest level for more than a decade. This is not without risks, even if the underlying level is as low as 0.75%. Although the MPC voted unanimously in rising interest rates in the UK, the narrative was one of caution, focusing on taming inflation rather than supporting jobs growth, with employment in the UK at a record high. The balancing act is made even tougher with the final shape of Brexit still unknown, with a little over six months until the deadline for leaving the EU.
It was an amber light for the Federal Reserve, with no change to their interest rate, which was fully expected, as the US central bank is nothing but transparent. Four interest rate raises where pencilled in for 2018 and we have seen a rate rise in March and June, with the next firmly scheduled for September. Their meeting last week strengthened the view that two more rate rises are on the cards, as the Fed chose to focus on the strength of the US economy, while deciding to ignore the threat of Trump’s tariffs.
Sitting at the red light is the Bank of Japan, as it continues to maintain its easy policy stance and is arguably the most accommodative of the four major central banks. There are no signs of interest rate rises on the horizon and the meeting served as a reminder of its commitment to maintain its easy monetary policy.
In the race of the tech giants to reach a valuation of a trillion-dollars, Apple was victorious, having reached the landmark point on Thursday. Having reported on earnings earlier in the week, which was above analysts’ expectations, Apple’s share price surpassed $207 taking the market capitalisation of the company above $1,000,000,000,000.
There are grey linings to this silver cloud though; Apple’s fastest growing division is the one most at risk. Accessories, including watches, earphones and speakers, is vulnerable of being caught up in Donald Trump’s latest proposals to slap a 25% tariff on Chinese imports. This would be a lose-lose dilemma for Apple: either rising prices in the US to compensate for higher duties or take a hit to their profit margins.
