3Q Wealth

Fed rate hike continues – another 75-basis point

Apr 3, 2023 | Blog

continued to increase much over the Fed’s target rate. Fed officials except the problem to linger into next year.

In a statement, the Fed official said, “In determining the pace of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” This Statement interprets that Fed will consider the sum of its rate increases when making its future moves, while its interest rate hikes will take some time to show an effect on the economy.

Market Reaction:

Major US market indices rose FOMC Meeting

November 3, 2022

On November 2, the Federal Open Market Committee (FOMC) concluded its meeting by raising the federal fund rate by 75 basis point (bps), to a range of 3.75% to 4%. Federal Reserve has now raised interest rates in the 4th consecutive meetings and has lifted the rate overall 6 times this year alone.

Inflation is driving the Fed’s aggressive monetary policy this year. Even as the Fed has continued to raise interest rates, prices have upon the release of the Fed’s statement, which promised to take economic risks more fully into account when determining the magnitude of any future rate rises, but those gains were lost after Powell spoke, and the day ended considerably lower. The S&P 500 index fell 2.5% and Nasdaq slid more than 3%.

Yield on US treasury securities, which dropped sharply after the Fed statement was released, turned higher and 2-year note – the bond maturity was up 6 basis point to about 4.61%.

According to CME Group FedWatch tool market, observers see more of hawkish future, which shows 50% chances rate are at range between 4.75%-5% come February 2023.