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FED Raises Rates By 0.75% Bringing Benchmark To 4%

FED Raises Rates By 0.75% Bringing Benchmark To 4%

Economics:

Federal Reserve Hikes Rates By 0.75% As Expected Bringing Total to 4%, For The Fourth Time In A Row, Highest Since January 2008

Federal Reserve Chair Jerome Powell addressed reporters today after the Fed raised rates by 75 basis points for the fourth time in a row, Powell said “incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

The move lifts the Fed’s benchmark to a 3.75%-4% range, from nearly zero in March. Rising borrowing costs have slowed the housing market, but the inflation rate is stubbornly stuck near 40-year highs.

Few remarks from Jerome Powell:

  • “We think that we have a ways to go, we have some ground to cover with interest rates before we get to that level of interest rates that we think are sufficiently restrictive,” Powell said, warning investors that the tightening campaign wasn’t over.
  • “It is very premature to be thinking about pausing,” he said, while also noting it could be appropriate to slow the pace of increases “as soon as the next meeting or the one after that.”

S&P 500 Suffers Worst ‘Fed Day’ Since January 2021:

Stocks sold off as Jerome Powell continued to sound hawkish as the Federal Reserve pushed ahead with its most-aggressive tightening campaign since the 1980s to tame inflation.

The S&P 500 suffered its worst session during Fed decision day since January 2021. Stocks came lower after Powell said the Fed still has “some ways to go” in its policy cycle, adding that they would pause as rates could peak at higher levels than previously thought. The move wiped out an earlier rally driven by his remarks that a slower pace of hikes could come as soon as December.

The hint of a potential downshifts in tightening saw estimates for the Fed peak in policy rates for 2023 briefly drop below 5% right after the announcement. But by the end of the session, forecasts extended to a new cycle high of around 5.1% for the May meeting.

Mega cap tech stocks got hammered after his remarks and during Q&A. Giants like Apple Inc. and Tesla Inc. tumbled more than 3.5% while the dollar gained.

Source: Bloomberg