Market Update – 15th December 2021.

‘Twas the week before Christmas, and all markets saw, was a week packed with data and monetary policy galore!

Markets so far this week have been readying themselves for a flurry of central bank meetings this week, with the Fed interest rate decision this evening, the Bank of England’s interest rate decision tomorrow, and the ECB announcing theirs 45 minutes later, giving markets just enough time to digest.

Turning to the BOE, raising interest rates has been on the cards for some time, and we know that when it does happen, it will be at a slow and glacial pace. Given the Plan B measures put into place last week, we think it would be a policy error to raise rates this time around. A December rate rise may have been a likely outlook a few weeks ago, but given the current, uncertain covid-19 climate, it is looking less likely that the base rate will increase this week.

The US debt ceiling – the amount of money that the US treasury can borrow to pay outstanding debt – was due to be reached today. Each time this ceiling is met, markets are worried that an agreement to renew won’t be reached, and that there will be closures of government run facilities around the US, or worse – default. However, Congress voted to raise the limit in time, ready for US President Joe Biden to sign the bill, securing enough scope to borrow until 2023.

This is great news for markets, who needn’t worry about the debt ceiling, and can now put their focus into Biden’s spending plan.

For the rest of the week, eyes will be on the aforementioned central bank policy announcements, in addition to UK and Eurozone PMI data, and Eurozone and UK inflation data.

Hannah Owen, Portfolio Specialist