"We think it's time to go to a meeting-by-meeting basis" – investors have seen this key quote as lowering the chance for yet another 75 bps rate hike in September. Markets are up, the dollar is down. Powell has also skipped a chance to push back against market expectations for rate cuts next year.
The US Federal Reserve on Wednesday announced that it had lifted the policy rate, federal funds rate, by 75 bps to the range of 2.25-2.5%. This decision came in line with the market expectation. In its policy statement, the Fed noted that it anticipates that ongoing increases in the policy rate will be appropriate.
“The US Federal Reserve (Fed) will opt for another 75 basis point rate hike rather than a larger move at its meeting next week to quell stubbornly-high inflation as the likelihood of a recession over the next year rises to 40%,” as per the latest Reuters poll of economists.
Wall Street Journal’s (WSJ) Nick Timiraos came out with the news piece that turned down market’s expectations of a 1.0% Fed rate hike. “Policy makers are leaning against full-point increase despite June inflation surge,” WSJ mentioned.
San Francisco Fed President Mary Daly said on Friday that she is not concerned above "over cooking things" on rate hikes, as reported by Reuters. "Fed is working on getting down inflation without stalling economy," also added.
The US Federal Reserve on Wednesday announced that it had lifted interest rates by 75 bps to 1.50-1.75%, as expected. The vote split was 10 to one, with Esther George favouring a 50 bps rate hike. The US central bank said in its statement that it anticipates ongoing increases to interest rates to be appropriate, noting that it is strongly committed to returning inflation to 2.0%.
Is the Federal Reserve serious enough about fighting inflation? That is the main question for markets, and my answer is yes. The decision only provides a nod to the Fed's other mandate of full employment, and undoubtedly focuses on crushing prices. The words "strongly committed" are a significant upgrade to the Fed's language.
The US Federal Reserve announced on Wednesday that the FOMC had agreed to raise the target range for the federal funds rate by 50 basis points to 0.75% to 1%, in line with expectations. The Fed further noted that it will begin trimming the balance sheet on June 1, starting with a $47.5 billion cap on monthly runoff and rising to $95 billion monthly after three months.
The Federal Reserve has lifted its leg from the hawkishness pedal – but remains en route to "expeditious" tightening, which is set to keep the dollar bid. After a series of hawkish comments on the impact of inflation – and kicking off the presser by talking directly to the American people – Fed Powell sent the dollar higher. But, traders want to know what's next.
Hawkish now, more hawkish later? The Federal Reserve's dot-plot has shown only a total of seven rate hikes in 2022, below seven that bond markets see – a 25 bps move in every single meeting this year. One down, six more to go. That is moderately bullish for the dollar, and the limited reaction makes sense.
Consumer sentiment last month was the worst in almost a decade but depression did not keep anyone home. Consumer spending saw the largest gain in ten months. In fact, if you leave out the four months of pandemic distortion, it was the biggest single month jump in consumption in three decades. A red-hot job market and the receding pandemic seem to have blunted the damaging impact of the highest inflation in a generation.
The Federal Reserve kept its rate policy on schedule, indicating in its statement and Chair Jerome Powell’s press conference that it will raise the fed funds rate at the March meeting for the first time in three years. In doing so the governors refused to be distracted by January’s turbulent equity correction or preliminary signs that the US economy may be slowing, preferring their new focus on inflation.
More dovish than hawkish market expectations – as described in the preview – and that is enough to boost stocks, extending their gains. First, despite a new and more hawkish composition, the Fed voted unanimously. There were no hawkish dissenters, showing that Powell remains in control. Second, the signal to raise rates does not include a date – "fairly soon" probably means March, but it is not a strong commitment. Third, the Fed continues printing money – no early end to its tapering scheme. That means a bit more money to support stocks.
This is what it sounds like when the doves cry – monetary policy was unlikely on Prince's mind, but his famous 1980s song reflects the Federal Reserve's decision as it confronts 1980s-style inflation. The Fed expects three rate hikes in 2022. That is more than expected and a sharp hawkish shift from September.
EUR/USD is heading south towards 1.0200 in early Europe, as bulls failed to keep reins near the monthly high. Mounting US-China tensions over Taiwan and recession fears weigh on risk sentiment and help the dollar find demand as a safe haven.
GBP/USD is trading deep in red near 1.2200, as investors turn away from higher-yielding assets such as the GBP. Despite falling US Treasury bond yields, the dollar manages to gather strength amid risk aversion. US Pelosi's visit to Taiwan is the main event risk this Tuesday.
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Gold price eases but upside remains favored amid escalating US-China tensions. The expected visit of US’ Pelosi to Taipei rattles markets amid China warnings. Gold bulls remain on track to test the critical resistance area at $1,786.
Bitcoin price is currently retesting the 200-week SMA at $22,794, anticipating a minor bounce. There are three trade opportunities that BTC presents, two of which favor the bears.
With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks.
In the US, the Board of Governors of the Federal Reserve (FED) meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency.
If rates remain unchanged, attention and also main news and analysis turn to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.
The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
Fed official website, on Twitter and Facebook
Jerome Powell
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
Jerome Powell Fed's Profile and Wikipedia
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
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Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in
February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will
expire January 31,
2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and
earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as
undersecretary of the Treasury
under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997
through 2005, Powell was a partner at The Carlyle Group.