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PremiumUS Fed news: The US Federal Reserve raised its target interest rate by three-quarters of a percentage point to a range of 3.00%-3.25% on Wednesday and signalled more large increases to come in new projections showing its policy rate rising to 4.40% by the end of this year before topping out at 4.60% in 2023 to battle continued strong inflation.
The Bank of England hiked its interest rate again today to combat soaring inflation as it warned that the UK's economy had already slipped into recession. The BoE met most market expectations as it lifted its key rate by 0.5 percentage points to 2.25 percent, repeating its August increase that had been the biggest rise since 1995.
“Indian markets reacted mainly to the US Federal Reserve's hawkish undertone on interest rate that fuelled pessimism amongst the investors. As expected, banking stocks bore the brunt that led to extended correction in local benchmarks. Technically, Nifty has formed lower top formation on daily and intraday charts and closed below the 20-day SMA (Simple Moving Average), indicating continuation of weakness in the near future. The index has been consistently facing resistance at higher levels and at the same time regularly taking support near the 17500 level. For the traders 17500 and 17700 would be the important level to watch out for and below 17500, the index could slip till 17400-17350 levels. On the flip side, a range breakout over 17700 could push the index up to 17800-17850," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
The rupee plunged 90 paise to close at an all-time low of 80.86 (provisional) against the US dollar on today after the US Federal Reserve's interest rate hike and its hawkish stance weighed on investor sentiments.
The NSE Nifty 50 index fell 0.5% at 17,629.80, while the S&P BSE Sensex dropped 0.57% to 59,119.72.
Cryptos fought off declines triggered by another large US Federal Reserve interest-rate hike, though sentiment remained cautious given the central bank’s warning of economic pain ahead from tightening policy. Bitcoin was about 1.2% higher as of 10:50 am in London today after earlier sliding as much as 4% toward levels last seen in 2020. Second-biggest coin Ether continued to underperform, shedding 2%.
Britain’s central bank is under pressure to make another big interest rate hike Thursday, with inflation outpacing other major economies but the US Federal Reserve and other banks acting more aggressively to get prices under control.
“While rising in Interest rates represent a headwind for Indian equities, our buoyant domestic demand scenario presents a sliver of hope for global investors looking to diversify globally. We remain constructive on Indian equities over the medium-term and continue to orient our portfolios around domestic cyclical which continue to look attractive to us from a medium-term perspective," said Trideep Bhattacharya, CIO Equities.
The Federal Reserve delivered its bluntest reckoning on Wednesday of what it will take to finally tame painfully high inflation: Slower growth, higher unemployment and potentially a recession.
Markets sank Thursday and the dollar rallied after the Federal Reserve unveiled a third straight jumbo interest rate hike, said more were in the pipeline, and warned the battle against inflation was straining the US economy.
While the three-quarter-point rise was widely expected, there was some surprise at the central bank's forecast that borrowing costs would likely be held above four percent throughout next year.
The Indian rupee hit a record low on Thursday as the dollar surged on the Federal Reserve sharply hiking rates and maintaining a stance that is more hawkish than expected.
The partially convertible rupee fell 0.7% to 80.5625 per dollar as of 0451 GMT, with the dollar index up nearly 1% to a new two-decade high of 111.60.
The Fed's new projections showed rates peaking at 4.6% next year, with no cuts until 2024. It raised its target interest rate range by another 75 basis points (bps) overnight to 3.00%-3.25% in a bid to tame runaway inflation.
Indian shares fell on Thursday, in line with Asian peers, while the rupee hit a record low after the US Federal Reserve raised interest rates and indicated more hikes than markets had expected.
The NSE Nifty 50 index fell 0.53% at 17,624, while the S&P BSE Sensex slipped 0.51% to 59,150.
The Indian rupee hit a record low of 80.45 against the U.S. dollar.
South Korea’s won weakened through the psychological level of 1,400 per dollar for the first time since 2009 after the Federal Reserve’s rate hike on Wednesday, heralding further losses for emerging-market currencies.
The won slid as much as 1% to 1,409.56 per dollar on Thursday, with Asian currencies similarly weaker against the greenback. The won is hardly an outlier in the larger emerging-market complex -- the MSCI emerging-market currency index is down by about 7.5% so far this year and heading for its deepest loss since 2008.
Asian stock markets followed Wall Street lower on Thursday after the Federal Reserve delivered another big interest rate hike to cool galloping inflation and raised its outlook for more.
Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices gained.
Hong Kong stocks slumped to the lowest since 2012 on concerns about the Federal Reserve vowing to continue hiking rates and heightened US-China tensions.
The benchmark Hang Seng Index fell as much as 2%, taking out the low seen during a March rout sparked by regulatory concerns. Alibaba Group Holding Ltd. and AIA Group Ltd. shares were the wost performers, falling at least 3% each. The Hang Seng China Enterprises Index slid 2% after entering a bear market in the previous session.
The U.S. dollar pushed to a fresh two-decade high versus major peers on Thursday, propelled by the Federal Reserve's hawkish outlook for interest rates and Russian President Vladamir Putin's mobilisation of more troops for the war in Ukraine.
The dollar index, which measures the currency against a basket of six counterparts including the euro and sterling, rose as high as 111.65 for the first time since June 2002.
Oil held losses near $83 a barrel after the Federal Reserve raised interest rates and signaled more aggressive monetary tightening, raising concerns about the outlook for energy demand.
The Fed decision will be followed by other central banks in Asia and Europe, which are also expected to raise borrowing costs, adding to bearish headwinds. Oil is on track for its first quarterly loss in more than two years on concerns over a slowdown, while thin liquidity has exacerbated price swings.
TD Securities (strategists including Oscar Munoz and Mazen Issa):
The Fed’s “decision does not change our view that the dollar is the only game in town"
“We suspect that USD/JPY will remain contained until we get through the BOJ meeting"
“There is still uncertainty over the terminal rate. So while we would not be as ardent supporters of USD/JPY topside from current levels, it is likely still premature to look for a sustained reversal lower until the BOJ abdicates yield-curve control at the very least"
Sumitomo Mitsui DS Asset Management (Masahiro Ichikawa, chief strategist in Tokyo)
“The Fed was more hawkish than expected overall"
“While a 75 basis-point hike was already priced in, the dot plot was quite hawkish while its economic projections also seem to point to deterioration in the economy"
Powell has also made it clear that he wants to get inflation under control even if that means the economic growth will be sacrificed
“I’d expect stock prices to remain unstable until we see a sign of moderation in inflation. US bond yields will remain elevated and that also suggests the dollar-yen will stay firm"
Fed officials have said they are seeking a “soft landing," by which they would manage to slow growth enough to tame inflation but not so much as to trigger a recession. Yet most economists say they think the Fed's steep rate hikes will lead, over time, to job cuts, rising unemployment and a full-blown recession late this year or early next year.
US stocks finished sharply lower after Fed said it would raise interest rates again and signaled the need for further rate increases in the months ahead. Trading was volatile. Stocks were up throughout the morning, then dropped shortly after the Fed’s announcement. They then jumped back into the green within the hour, only to tumble in the final hour of trading.
Shorter-term Treasury yields ticked higher while longer-term yields fell after the Federal Reserve signaled interest rates will likely climb more this year than many investors had expected.
The decision—unanimously supported by the Fed’s 12-member rate-setting committee—will lift its benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008.
Powell says the US Federal Reserve will 'keep at it' until the inflation comes down.
S&P 500 regains ground to briefly turn positive as Fed Chair Jerome Powell speaks, last down 0.06%.
Powell says, "We will need to bring our funds rate to a restrictive level and keep it there for some time."
No one knows where the economy will be a year from now, Powell says.
"My main message has not changed at all since Jackson Hole," Powell tells the room.
Federal Reserve Chair Jerome Powell announces a dramatic interest rate hike – the latest in a series of borrowing cost increases, as the central bank tries to dial back near-historic inflation while avoiding an economic downturn.
The goal: to get businesses and households to pull back on spending and reduce demand for goods, services and labor, thereby easing upward pressure on prices. READ FULL REPORT HERE
Fed Chair Jerome Powell holds a news conference after the Federal Reserve raised its key interest rate by three-quarters of a point for a third straight time.
Oil prices fell after the Fed delivered another hefty rate hike to tame inflation, but that may also reduce economic activity. Brent futures fell 54 cents, or 0.6%, to $90.08 a barrel by 2:15 pm EDT (1815 GMT), while US West Texas Intermediate (WTI) crude fell 71 cents, or 0.9%, to $83.23.
Fed Chair Jerome Powell will hold a news conference at 2:30 pm EDT (1830 GMT) to elaborate on the latest two-day policy meeting.
The yield on the 2-year Treasury, which tends to follow expectations for Fed action, rose to 4.01% from 3.97% late Tuesday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.57% from 3.56% from late Tuesday.
Gold prices dropped after the US Federal Reserve raised the benchmark borrowing rate by 75 basis points. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold. Spot gold declined 0.2% to $1,662.40 per ounce in New York trading. The Fed said it anticipates ongoing rate hikes are appropriate, while the median Fed forecast shows rates at 4.6% in 2023. Gold is down more than 8% this year.
While today's decision was unanimous, the dot plot shows 10-9 majority in favour of hiking above 4.25% this year, suggesting a fourth straight 75 basis-point increase in November is possible. Policy makers expect rates will be cut in 2024, to about 3.9%, and to 2.9% in 2025.
The dollar pushed higher after the Federal Reserve raised rates by 75 basis points.
The GDP growth forecast has been marked down to 1.2% in 2023 and 1.7% in 2024, below the longer-run trend. Unemployment is seen rising to 4.4% in 2023.
Inflation by the Fed's preferred measure – the personal consumption expenditures price index – will likely be 5.4% in the last quarter of 2022 before cooling to 2.8% in the final quarter of 2023, the projections show. By the end of 2024, policymakers see inflation at 2.3%, and easing to its 2% target by the end of 2025.
Cryptocurrencies were mostly little changed after the US Federal Reserve officials raised interest rates by 75 basis points for the third consecutive meeting. Bitcoin, the largest token by market value, traded at about $19,000 as of 2:09 pm in New York on Wednesday, while other major coins like Ether, Solana and Avalanche were also little changed.
The Fed's quarterly summary of policymaker projections shows US central bankers expect to raise the policy rate, now in the 3%-3.25% range after Wednesday's 75-basis-point increase, to 4.4% by the end of this year and to 4.6% by the end of next year, according to the median estimate of all 19 Fed policymakers.
US stocks erased gains after the Federal Reserve raised rates by 75 basis points. The S&P 500 pushed lower. The Dow Jones Industrial average was down 0.8% while Nasdaq fell 0.9% after being up between 0.5%-0.8% just before the policy announcement.
The Federal Reserve raised its key interest rate Wednesday by a substantial three-quarters of a point for a third straight time, an aggressive pace that is heightening the risk of an eventual recession.
The dollar was on track for its highest close in over 20 years against a basket of other currencies, making oil more expensive for buyers using other currencies. In the US, however, the economic news was not so good. Existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates.
Oil prices were steady in volatile trade today as the market waited for direction from the US Federal Reserve.
The S&P 500 rose 0.6% as of 12:50 pm Eastern. The Dow Jones Industrial Average rose 147 points, or 0.5%, to 30,851 and the Nasdaq rose 0.6%.
Several economists are expecting a third straight three-quarter point rate hike when the meeting concludes today, which would be an unprecedented action since that era. But there is a chance the Fed could opt for a full point increase.
Gold rose as Russian President Vladimir Putin's move to mobilise more troops over the conflict in Ukraine drew investors to the safe-haven asset, offsetting pressure from a firmer dollar and looming US interest rate hikes. Spot gold rose 0.3% to $1,667.41 per ounce by 11:46 am ET (1546 GMT). US gold futures rose 0.3% to $1,675.80.
At 11:54 am ET, the Dow Jones Industrial Average was up 147.98 points, or 0.48%, at 30,854.21. The S&P 500 was up 19.88 points, or 0.52%, at 3,875.81. Meanwhile, the Nasdaq Composite rose 42.26 points, or 0.37%, at 11,467.31, led by a 0.8% and 2.2% rise in shares of Microsoft Corp and Nvidia Corp, respectively.
The rupee declined by 22 paise to close at 79.96 against the US dollar today, tracking the strength of the American currency in the overseas markets and a muted trend in domestic equities. Forex traders said investors are awaiting the US Fed's policy decision on interest rates for further cues.
Oil erased gains ahead of a Federal Reserve meeting that is expected to signal a continuation of measures to restrain economic growth, overshadowing Russia’s threat to escalate a war that is disrupting energy supplies.
Two-year Treasury yields hit 4% on Wednesday for the first time since 2007 before the US Federal Reserve is expected to hike interest rates by another 75 basis points and indicate further rates are likely as it battles soaring inflation.
