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Breakfast Report - 04 October 2022
- For the third time this year, the Monetary Policy Committee (MPC) delivered another hawkish decision. The Monetary Policy Rate (MPR) was raised by 150bps to 15.50% and the Cash Reserve Ratio (CRR) was raised 500bps to 32.5%. The decision was driven by the committee's desire to reduce the negative real rate of return and curb growth in money demand. Although the hikes will not address structural inflation, they may reduce monetary-induced inflation from the electoral campaign season. Looking ahead, a rate hike at the last MPC meeting of the year will be dependent on the direction of inflation in Q4’22.
- Equity: The ASI’s YTD return dipped by 1.63% last month, as the market declined further in comparison with the 1.06% loss in August. While we anticipate a cautious trading tone in the market this week, we are likely to see demand in some of the bellwether stocks given their current prices.
- Fixed Income: To open this week, we expect increased activity in the bond market due to anticipated FAAC credit, while the NTB market should trade on a bearish note as investors continue to trade post auction sentiments.
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