Market Outlook: What to expect from Powell's final Fed rate decision

0:00Right, it is time for a look at the markets now thanks to our partner's full-south bars. Zoe Wallace, investment strategist at full-south bar joins us live, so a good morning. Yeah, morning, Ryan. Global reporting season. Well, we've got first quarter results coming from some pretty big companies in the US this week. We do indeed. We've got five of the seven magnificent seveners that are so called reporting this week. So that includes alphabet, Amazon, Apple, Microsoft and Meta. We had Tesla results out last week and we've got Nvidia in another month. They report sort of late in the season as such. But look, a lot of focus will be on those five big names given they make up a huge amount of market capitalisation on a equity weighted or market cap weighted basis in the US. And they've obviously been a bit of a bell weather for this AI trade over the last few years. So big question mark around what their outlook in terms of capital expenditure is looking like. So how much of these firms still investing in AI, capacity, data centers, capability, etc at the moment? Meanwhile, we've got a bunch of central banks reporting this week, don't we? We've got

1:01Fed, ECB, Bank of England. The Fed will be interesting because while they're expected to hold, but because of Jerome Pell, this could be as last to rare. Yeah, absolutely. Look, all of those central banks are expected to leave monetary policy settings unchanged this week. But that doesn't stop it from being a quite interesting set of meetings given that everyone is focused on how much of an inflation impact are we going to see as a result of what's going on in the middle east. Fuel prices are continuing to remain elevated. You've got all prices, you know, now Brent crudes back up above $108 a barrel. How much central banks are prepared to look through this and how much they're seeing this is a more systemic inflation problem. And also on the other side of that, how growth is panning out. Now, when it comes to how the Fed still doesn't have a replacement and technically, Powell stands down as Fed Chair in mid-May. So they don't have too long to go now and may end up that he carries on in some sort of temporary capacity as sort of acting Fed Governor or Fed Chair for each meeting. But he remains on the Board of Governors is likely to continue to 2028.

2:04Zoe, what about Walsh? Yeah, it's interesting. We obviously had the Senate Committee hearings over the past couple of weeks. And what we saw was that some of the Republicans were blocking his nomination because they were unhappy about the way that Powell has been treated in terms of this court case. That is now being dropped by the Department of Justice last week. And so that may clear the way for his confirmation to go through, hopefully in the next week or two, and provide some certainty around that. Now, obviously, there's a question mark around what his stance on monetary policy will be. A lot of the lines of questioning over the last few weeks have been, you know, essentially will he act as Donald Trump's puppet when it comes to interest rates policy? And Trump has made no secret of the fact that he would like to see interest rates lower than they are at the moment. Locally, we had, well, I think it was down 26 points, business competence survey from ANZ. That was for March. What are we expecting for April?

3:06Yeah, look, in terms of business confidence, hoping to see a little bit of a stabilization, as we have seen things generally stabilize in terms of fuel costs. But expect that firms are still dealing with quite a high level of uncertainty going forward, still facing those ongoing cost pressures fading into them. Big question will be, are they going to start passing that on to consumers? What about the rates hike that, well, is it going to happen? Is it going to happen next month, the RBNZ meeting and markets of split? Very much so. So we've seen quite a big shift in market pricing for interest rate hikes from the RBNZ. So now markets are about 50, 50 priced for a rate hike in May. Look, that's quite soon. I think a little bit depends on what happens in the next month. To be honest, we've got RBNZ inflation expectation survey, and that's something that they are very clearly watching is, is the fact that headline inflation is moving higher, fuel costs are in the paper all the time, everyone's talking about inflation pressure or the risk of inflation. Is that going to translate into firms then putting prices up? But also expectations that inflation

4:07will continue to rise in prices and costs will keep rising. That's the big question mark for the RBNZ at the moment. I think to some extent, if that doesn't happen, then they can look through a temporary spike in inflation. But markets are certainly pretty convinced that they'll be successive interest rate hikes this year. I think it's still a little bit of weight and see how things progress in the coming month. So good to see you as always, Zoe Wallace, investment strategist at Forsyth Bar. We thought markets every Monday or Tuesday, if the long weekend allows it, thanks to our partners Forsyth Bar.