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After the US, the market is edgy this morning Federal Reserve Investors were surprised to see interest rates rise from record lows faster than expected as the US recovery accelerated.
The Fed’s new forecast, released after yesterday’s latest policy meeting, shows that rate hikes are expected at least twice in 2023. Previously, the majority of officials were on hold near zero until 2024.
The Federal Reserve Board has also begun a process of “discussing” how the bond purchase program can be terminated. This is a sign that we are a little closer to breaking away from the stimulus of the crisis.
This unexpected hawkish move knocked on Wall Street stocks last night. S & P 500 Finished 0.5% lower.
The prospect of an early rise in interest rates also pushed the dollar up to a two-month high and pushed the pound down to less than $ 1.40 for the first time in more than five weeks.
The European market is also heading for a lower open.
The Federal Reserve Board has also raised its growth forecast for this year from 6.5% to 7%, but expects inflation to rise from 2.4% in March to 3.4%.
As I wrote my blog last nightPowell, chairman of the Federal Reserve Board, argued that the central bank would not change course until “substantial further progress” in employment and inflation was seen.n.
“Lift-off is a long way off.
“We are far from maximum employment. For example, it is a consideration for the future.”
He also argued that the surge in US inflation was temporary and showed confidence in growth prospects and job creation.
The Federal Reserve Board also emphasized that the pace of labor market recovery is uneven, saying:
The recession did not fall equally to all Americans, with those who bear the least burden suffering the most.
But … he also said the Fed would use the tool as needed, noting that inflation could turn out to be “higher and more sustainable” than expected.
Powell also revealed that the Fed will delay (or taper) asset purchase stimuli at the right time.
We will do everything we can to avoid market reaction, but eventually taper off as needed when we reach our macroeconomic goals.
The FOMC is currently buying $ 120 billion in bonds per month with newly coined funds.
Powell also sought to cool the Fed’s interest rate forecasts, or dot plots, and claimed they weren’t good predictors (Officials say where they think interest rates will be in the coming years).
Investors see last night’s meetings and press conferences as an important moment.
So Oliver BlackboneJanus Henderson Investors’ Multi-Asset Portfolio Manager explains:
“This time we couldn’t deny it, the Federal Reserve took the first tentative step on a more hawkish path. It was immediately felt in the market. Immediate changes to policy There wasn’t, but the median rate forecast saw two increases in the end of 2023 forecast, and talks about tapering have finally begun. He suggested that the start of tapering remained “off the road” as he continued to seek progress.
The Fed’s economic forecasts have shifted higher as they recognize that this year’s growth will be even stronger than they had already predicted. The expected 7% growth rate is currently above economists’ consensus expectations, but forecasters are more optimistic about 2022 growth than the US central bank. Elsewhere, the Fed’s forecast shows a clear bias towards inflation above target in the coming years. PCE inflation is projected to exceed the target over the next three years.
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Stocks fell and the dollar rose after the Federal Reserve Board suggested an early rate hike – Business Live | Business
Source link Stocks fell and the dollar rose after the Federal Reserve Board suggested an early rate hike – Business Live | Business