Global Central Bank Policies Continue to Diverge

ICE interest rate futures provide hedging and exposure

March 2017 is a key month for global central banks, with monetary policy meetings of the European Central Bank (ECB), the U.S. Federal Reserve (Fed) and the Bank of England (BoE). Here’s a quick look at the outcome of each central bank meeting.

In the U.S

On 15 March, the Fed raised the U.S. interest rate for the third time since the financial crisis, raising its benchmark rate to a 0.75-1 percent range. Following the decision, the Fed cited a recent increase in inflation, a “moderate pace” of expansion in the U.S. economy and Fed Chair Janet Yellen expressed the will to raise interest rates in a "measured" fashion throughout 2017.

In the Eurozone

Leading into the March ECB meeting, the February consumer price index (CPI) exceeded the 2 percent target, prompting Mario Draghi to claim at the last ECB press conference that he "defeated deflation." With its eyes on overseas developments, and with particular attention being paid to upcoming elections in Europe, the ECB voted to keep rates unchanged.

Following the press conference, traders repositioned themselves using ICE’s interest rate futures markets, driving a new volume record in ICE Euribor futuresof 3,212,269 contracts traded on 9 March 2017. The full ICE interest rates complex continues to offer effective hedging mechanisms for professional investors who have or need interest rate exposure.

In the UK

The BOE voted to hold rates steady at 0.25 percent. However, it’s noteworthy that the March BOE meeting is the first instance since last summer in which the vote to maintain interest rates was not unanimous; the March vote was 8-1 with Monetary Policy Committee member Kristin Forbes voting for an increase.

On the day of the BOE vote, Prime Minister Theresa May contributed to market activity when she commented that there wouldn’t be a referendum in Scotland. Traders responded to the combined market triggers with an increased focus on risk management, driving ICE short sterling to more than 1.7 million lots traded on 15 March.

Managing Interest Rate Risk

As shifting central bank policies continue to present new risks and opportunities in the global marketplace, professional investors who have or need interest rate exposure can rely on the liquidity and breadth of ICE global interest rate futures and options products to hedge their risk and express their market views.

Whether you’re responding to the outcome of Brexit in the UK, the French and German elections in the EU, or the diverging monetary policies of global central banks, the ICE interest rates franchise is designed to help you manage interest rates exposure. Our rates markets offer deep liquidity out the curve to provide effective hedging mechanisms.