PremiumThe US Federal Reserve delivered their fourth straight 75 basis-point interest rate increase while also signalling their aggressive campaign to curtail inflation could be approaching its final phase. The unanimous decision lifts the target for the benchmark federal funds rate to a range of 3.75% to 4%, its highest level since 2008.
“Mr Market was expecting the 0.75 percentage rate hike from the U.S. Fed which has shown determination to stay the course until the job's done. It looks like H1 2023 is going to see a level of 5-5.5% Fed funds rate and a real GDP of 0%-1%, but a nominal GDP of 6%-7% or so. This should not be confused with a bear market. Most likely by H1 2023 the markets will start looking beyond to the pause in the rate hikes and the eventual loosening to bring the Fed rate back to the neutral 2.25%-2.5%. Thus, 2023 could be quite bullish as soon as core PCE inflation rates look like they are moving below the 5 year treasury yields," said Vikas Gupta, CEO and Investment Strategist, OmniScience Capital.
IIFL Securities Director Sanjiv Bhasin expects the outperformance of Indian stock markets to continue. “Federal Reserve has lost credibility. They are speaking in different tones. Some members being dovish while the chairman being hawkish. FOMO (fear of missing out) is huge for foreign investors who are now buyers since last week. Retail flows are calling the shots. Expect the Fed news to get discounted by end of the day. New highs on the cards in November," Mr Bhasin said.
The Russian rouble hit a more than two-week low against the dollar in early trade on Thursday, as global oil prices slipped after the Federal Reserve raised interest rates and expectations of more tightening set the stage for further firming of the US currency.
Australian shares closed lower on Thursday, after a hefty rate hike and hawkish messaging from the U.S. Federal Reserve startled global markets, with rate-sensitive banking stocks and domestic miners leading losses.
Gold prices were flat on Thursday, following a volatile session, as hopes of a pivot dissipated after U.S. Federal Reserve Chair Jerome Powell signalled further rise in borrowing costs.
Spot gold was flat at $1,635.42 per ounce, as of 0637 GMT, after falling 0.8% on Wednesday.
Investors trying to navigate this year's relentless interest rate rises have more reasons to play it safe, after a pessimistic message from the U.S. Federal Reserve clouded the outlook for asset prices.
The Hong Kong Monetary Authority (HKMA) on Thursday raised its base rate charged via the overnight discount window by 75 basis points to 4.25%, and said households should brace for a period of higher commercial rates and carefully manage financial risks.
The rupee depreciated 8 paise to 82.88 against the US dollar in morning trade on Thursday after the US Federal Reserve raised interest rates and maintained a hawkish stance.
At the interbank foreign exchange, the domestic unit opened at 82.87 against the dollar, then lost further ground to quote at 82.88, registering a loss of 8 paise over its previous close.
Indian stock markets fell today, tracking a slide in Asian peers after US Federal Reserve chairman Jerome Powell overnight said that the US central bank would raise interest rates more than previously anticipated, sapping the risk appetite. The Fed raised rates 75 basis points for the fourth time in a row, bringing the top of its target range to 4%, the highest level since 2008.
Copper prices fell on Thursday as risk sentiment soured and demand outlook for metals dimmed due to prospects of protracted policy tightening by the US Federal Reserve.
The Indian rupee is tipped to decline against the dollar on Thursday, after U.S. Federal Reserve Chair Jerome Powell noted that interest rate hikes might have to rise more than what was previously expected.
The rupee is expected to open at around 82.85-82.90 to the dollar, compared with 82.7800 in the previous session.
A more hawkish-than-expected Jerome Powell sent US stocks spiraling lower Wednesday and analysts expect more of the same for Asia Thursday. Higher-for-longer US interest rates are likely to impact growth in the region, weigh on stocks and put further pressure on currencies thanks to a strengthening dollar.
Asian stocks slumped after Jerome Powell said the Federal Reserve would raise interest rates more than previously anticipated, sapping risk appetite and sending global equities to their worst day in nearly a month.
A sharp reversal in the yen in the wake of a hawkish Federal Reserve had currency traders on edge Thursday, with Japan on holiday and the threat of intervention still looming.
Oil fell after Federal Reserve Chair Jerome Powell said interest rates will go higher than earlier projected, overshadowing tightening supply.
Wall Street money managers looking to pile back into Treasuries after months of losses will have to contend with a Federal Reserve that stands ready to raise the stakes every step of the way.
The Hong Kong Monetary Authority (HKMA) on Thursday raised its base rate charged through the overnight discount window by 75 basis points to 4.25%, hours after the U.S. Federal Reserve delivered a rate hike of the same margin.
Fed Chair Powell said that it will take time for the central bank rate hikes to bring inflation down, and that will necessarily lead to slower US growth. While the housing market has slowed, "It will take time... for the full effects of monetary restraint to be realized, especially on inflation," he said, adding that the effort is "likely to require below-trend growth."
The dollar slid broadly against major currencies after the Fed signalled that future interest rate increases to battle high inflation could be made in smaller increments.
- It is premature to consider pausing
- If we don't get the inflation down, it will become entrenched
- We will update our estimate of where rates will need to go in December
Fed to begin discussing slower rate hikes in December: Jerome Powell
Powell says: "The question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive."
“The ultimate level of rates will be higher than previously expected"
- Demand far outnumbers supply
- The labour market remains extremely constrained
- US job openings remain plentiful
- The slower output growth is also putting pressure on business fixed investment
“We are firmly committed to lowering inflation and we have resolve," says Fed Chair Jerome Powell.
The Dow Jones Industrial Average rose 220.81 points, or 0.68%, to 32,874.01, the S&P 500 gained 13.5 points, or 0.35%, to 3,869.6 and the Nasdaq Composite added 12.89 points, or 0.12%, to 10,903.73.
US Federal Reserve Chair Jerome Powell will have a chance to elaborate on the outlook for future meetings at his press conference at 12:00 am (IST) in Washington.
White House press secretary Karine Jean-Pierre said the Fed's latest move to raise its benchmark interest rate will help to bring down inflation, and a rise in mortgage rates should cool inflation in the housing market.
- Fed hikes the federal funds target rate by 75 basis points for a fourth straight meeting to 3.75%-4% range
- Officials anticipate “ongoing increases" in borrowing costs but adds a qualifier saying they're aiming for tightening that's “sufficiently restrictive" to return inflation to 2% over time
Another big change to the statement is a new line with a signal that tightening is entering the final phase: “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"
- The decision is unanimous
Stocks erased losses as the Federal Reserve signaled its most-aggressive campaign since the 1980s to curb inflation could be entering its end phase, with traders now awaiting to hear more details from Chair Jerome Powell. The S&P 500 climbed.
The Fed said that “ongoing increases" will likely be needed to bring rates to a level that is “sufficiently restrictive to return inflation to 2% over time".
The new language in the policy statement took note of the still-evolving impact that the Fed's rapid pace of rate hikes has set in motion, and a desire to hone in on a level for the federal funds rate "sufficiently restrictive to return inflation to 2% over time."
The Federal Reserve on Wednesday raised interest rates by three-quarters of a percentage point as it continued to battle the worst outbreak of inflation in 40 years, but signaled future increases in borrowing costs could be made in smaller steps to account for the "cumulative tightening of monetary policy" it has enacted so far.
Former Fed Chair Alan Greenspan sees a monetary “tailwind" for the dollar in the coming year even in the event that US monetary policymakers slow or halt their current interest-rate hiking campaign.
Traders are split on the odds of a 50 bps or 75 bps rate hike in December, according to CME Group's Fedwatch tool. The Fed's interest rate decision is due soon, but focus will be on commentary from Fed Chair Jerome Powell later.
Stocks fell as data showed continued labor-market strength, with investors waiting to hear from Fed Chair Powell on whether it would be realistic to expect a slowdown in the pace of rate hikes going forward. The S&P 500 saw its third straight loss, while the tech-heavy Nasdaq 100 underperformed as big names like Apple and Tesla sold off. Boeing climbed after its chief’s bullish cash outlook.
Euro zone government bond yields drifted higher, after US employment data tempered expectations for the central bank to signal it may not raise interest rates as quickly.
European and US stock markets slid today, with investors on edge before another widely expected jumbo interest rate hike from the US Federal Reserve. On Wall Street, the Dow was down 0.4% in midday trading, while the broader S&P 500 slid 0.8% and the tech-heavy Nasdaq slumped 1.3%.
The broader market is likely to remain somewhat subdued ahead of the Federal Reserve's post-meeting announcement at 11:30 pm today, when the central bank is expected to deliver its fourth, 75 basis points interest rate increase.
The US should prepare their finances for even higher interest rates this year as the Fed continues its fight against inflation. Investors were also cautious ahead of the Federal Reserve's meeting on interest rates.
Hiring at US companies rose in October by more than forecast, mainly reflecting a surge in leisure and hospitality and underscoring resilient labor demand despite the US Fed's efforts to cool the economy. Private payrolls rose 239,000 last month after a revised 192,000 gain in September, according to data from ADP Research Institute in collaboration with Stanford Digital Economy Lab.
A sense of caution was reflected in the S&P 500’s swings Wednesday – with the gauge currently on track for its narrowest range this year. Of course, things might change depending on the market reaction to the Federal Reserve's decision.
By comparison, eight of the same 10 central banks raised rates by a combined total of 550 bps in September, the fastest pace of tightening in at least two decades. The latest moves have brought total rate hikes in 2022 from G10 central banks to 2,050 bps.
The stock market’s recent optimism looks misplaced with the rally too dependent on expectations the US Federal Reserve will drop hints that rate hikes will slow, according to strategists at Barclays Plc and HSBC Holdings Plc, who urge caution.
Global stock indexes fell and the dollar was slightly lower against other major currencies. A Reuters poll found currency strategists thought the dollar's retreat was temporary.
The Federal Reserve is due to release its policy statement at 2 pm EDT (11:30 pm IST), but traders' focus will be on commentary from Fed Chair Jerome Powell later.
Gold prices will average $1,712.50 an ounce next year, rising from current levels. Gold has tumbled from above $2,000 an ounce in March to around $1,650 as the Fed and other central banks raised interest rates rapidly to tackle inflation.
Oil remained near $88 a barrel, avoiding any large moves even as an industry report pointed to another sizable decline in US crude inventories. West Texas Intermediate futures were little changed after switching between gains and losses, with prices stuck in a $12 band over the last month. US crude stockpiles fell 3.12 million barrels last week, as per an Energy Information Administration report.
The dollar slipped broadly today as investors awaited a Federal Reserve policy decision amid speculation it might signal a slowdown in the pace of future rate hikes. The euro was 0.11% higher against the dollar at $0.9885, while against the Japanese yen, the dollar fell 0.8% to 147.03 yen.
Treasury yields were little changed today hours before the US Fed is widely expected to raise its policy interest rate by 75 basis points amid market speculation the central bank may signal an easing of monetary tightening. The yield on benchmark 10-year Treasury notes was above 4%, while two-year yields, which typically moves in step with interest rate expectations, was above 4.5%.
Market analyst Fawad Razaqzada at City Index and FOREX.com believe that a fourth consecutive 75 basis point rate hike will not surprise anyone, but the key question is whether the Fed will signal that it is ready to pivot to a less hawkish stance in its December and subsequent meetings
Economists fear that rising interest rates will spark a global economic downturn because they ramp up loan repayments for individuals and businesses, thereby denting consumer spending and investment.
US stocks are opening modestly lower ahead of what traders expect will be another big interest rate increase from the Federal Reserve to fight the worst inflation in four decades. The S&P 500 was off 0.4%, as was the Dow Jones Industrial Average and the Nasdaq.
The central bank has been ramping up interest rates to cool demand and fight surging inflation, amid fears the strong labor market will cause a wage spiral.
Oil traded near $88 a barrel before the US Fed’s latest interest rate decision and as an industry report pointed to another sizable decline in US crude inventories.
US futures trading on Wall Street appeared to be in a holding pattern ahead of a decision by the Federal Reserve on an interest rate increase in its attempt to curb inflation. Futures for the Dow Jones industrials were unchanged and the S&P 500 rose less than 0.1%.
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