Fed

2022 - 6 - 15

Post cover — Image courtesy of "Financial Times"

Fed weighs biggest rate rise in decades to tame scorching inflation (Financial Times)

The Federal Reserve is set to embrace an increasingly aggressive approach to monetary policy tightening as it confronts the highest inflation in four ...

An aggressive Fed has global ramifications. Here are 3 ways the ... (CNBC)

Global markets have taken a hammering to start the week as expectations grow that the U.S. Federal Reserve will need to hike interest rates more ...

However, she acknowledged that the U.S. economy is clearly heading toward a significant slowdown, and the "soft landing" is becoming harder to achieve. "It clearly means that we could see a stronger dollar and therefore a weaker euro, which had already been a concern for several ECB officials. So of course recession risks have increased with last week's CPI print and consumer inflation expectations reading," she added. "I think that no matter what happens in terms of the economic outlook – and yes, the likelihood of an economic recession is mounting – the likelihood of a profit recession is mounting a lot faster." "The U.S. economy is far less sensitive to tightening in financial conditions from the exchange rate compared to trade-heavy economies — we're looking at the likes of Switzerland, Japan, the euro zone even, and there's a lot of emerging markets," Yu said. "What this could mean is that at least the hawks at the ECB would push for more rate hikes than they have currently penciled in just to offset the inflationary impact from a weaker euro." If we were ready to move towards parity, I think the weaker euro – even if this is not a target for the ECB – adds to the inflationary pressure, and therefore is a concern," Brzeski said. "It probably means to a certain extent that they are afraid that the Fed will be doing serious rate hikes like the 75 basis points that we are expecting, and that will somehow have some impact on risky assets in the market, and it will further increase fragmentation in European sovereign bond markets," Monier said. May's U.S. consumer price index reading came in at 8.6% year-on-year, the highest since 1981, and prompted the market to price in a 75 basis point hike from the Fed on Wednesday. - May's U.S. consumer price index reading came in at 8.6% year-on-year, the highest since 1981, and prompted the market to price in a 75 basis point hike from the Fed on Wednesday. Hooper remained hopeful that the U.S. will still be able to avoid a recession and that the Fed will succeed in engineering a "soft landing" by being sufficiently hawkish but data-responsive. "Friday's U.S. inflation print had an impact on markets globally, and that seems appropriate given that the Fed, to a certain extent, is the world's central banker, and could certainly help cause a global recession," said Kristina Hooper, a global market strategist at Invesco.

From Big Tech to Bank Stocks, Traders Brace for Fed Rate Hike (Bloomberg)

The US stock market remains on edge ahead of Wednesday's Federal Reserve announcement, with investors expecting a 75 basis-point increase in rates, ...

Fed expected to ramp up inflation fight with big rate hike (Reuters)

Federal Reserve policymakers on Wednesday are expected to deliver the biggest U.S. interest rate hike in more than a quarter of a century, along with ...

The decline is a bit concerning, said Tom Simons, an analyst at Jefferies, as it hints of inflation "fatigue" among consumers whose strong spending has been the mainstay of economic growth since the coronavirus pandemic. A summary is expected to show a Fed policy rate rising past 3% by the end of this year but perhaps only a moderate cooling in price pressures. By hiking rates in 0.75-percentage-point increments, the Fed would achieve that level by July. Register now for FREE unlimited access to Reuters.com Fed officials had hoped inflation would be leveling off by now. Register now for FREE unlimited access to Reuters.com Register now for FREE unlimited access to Reuters.com Contracts reflect expectations for the Fed policy rate to end the year in the 3.75%-4.00% range. Traders of futures tied to the Fed's policy rate are now betting on another 75-basis-point rate hike in July and at least a couple of 50-basis-point hikes after that move. "Getting in front of the problem is always better than being behind the curve," Piper Sandler economists Roberto Perli and Benson Durham wrote, adding that a bigger move now makes it less likely the Fed will have to do more later, but also raises the likelihood of a recession next year. Traders and economists began this week expecting a half-percentage-point rate hike, as Fed policymakers had for weeks signaled that would be likely for the next couple of meetings, with a downshift in the pace possible by September. Fed watchers expect the U.S. central bank to raise its short-term policy rate by 0.75 percentage point to a range of 1.50% to 1.75%, the first increase of that size since 1994.

Fed Meeting Live Updates: Investors Expect 0.75-Percentage-Point ... (The Wall Street Journal)

U.S. stocks rose and government bonds steadied as investors awaited the Federal Reserve's interest-rate decision Wednesday. European stocks and peripheral ...

Software intelligence firm MicroStrategy rose 8% after tumbling as much as 25% on Tuesday. MicroStrategy held 129,218 bitcoins, worth $5.9 billion, at the end of March, it said. The company has hired restructuring attorneys to explore possible solutions for its mounting financial problems, the Wall Street Journal reported on Tuesday. The total market capitalization of all digital currencies fell to $913 billion, well below its November peak of $3 trillion, according to CoinMarketCap data.

Surging inflation clears way for biggest Fed hike in years (ABC News)

The Federal Reserve is expected to announce its largest interest rate hike since 1994 — a bigger increase than it had previously signaled and a sign that ...

In addition to the ECB, the Bank of England has raised rates four times since December to a 13-year high, despite predictions that economic growth will be unchanged in the second quarter. Ultimately, the unemployment rate will almost certainly have to rise — something the Fed hasn't yet forecast but could in updated economic projections it will issue Wednesday. By the end of 2022, the Fed will have raised its key rate as high as a range of 3.25% to 3.5%, some economists estimate, higher than what was forecast just a few weeks ago. Also on Friday, a consumer sentiment survey by the University of Michigan found that Americans’ expectations for future inflation are rising. That is a worrisome sign for the Fed, because expectations can become self-fulfilling: If people expect higher inflation in the future, they often change their behavior in ways that increase prices. The global efforts to tighten credit are escalating the risk of a severe downturn in the United States, Europe and elsewhere. “I think they’re going to have to cause a contraction.” A sustained decline in spending could slow the economy but could also reduce inflation pressures over time. The 10-year Treasury yield, which affects mortgage rates, has reached 3.4%, up nearly a half-point since last week and the highest level since 2011. It could announce a larger hike in September if record-high levels of inflation persist. The Fed's previous rate hikes have already had the effect of raising mortgage rates roughly 2 percentage points since the year began and have slowed home sales. Other central banks around the world are also acting swiftly to try to quell surging inflation, even with their nations at greater risk of recession than the U.S. The European Central Bank is expected to raise rates by a quarter-point in July, its first increase in 11 years.

Growth stocks lift Wall St ahead of Fed's big rate decision (Reuters)

Wall Street's main indexes rose on gains in beaten-down growth and financial stocks on Wednesday even as investors braced for a bigger interest rate hike by ...

Treasury yields pull back slightly as the Fed hikes rates as expected (CNBC)

U.S. Treasury yields pulled back slightly on Wednesday after the Federal Reserve's key monetary policy announcement.

The U.S. consumer price index rose by an annual 8.6% in May, its highest year-on-year increase since 1981. The Federal Open Market Committee in May raised the target range for the federal funds rate to 0.75% to 1%, from 0.25% to 0.5%. The Federal Open Market Committee raised interest rates by 75 basis points, or its largest hike since 1994, in an aggressive bid to rein in inflation.

S&P 500, Dow, Nasdaq edge up as Fed announcement today on ... (USA TODAY)

Wall Street edges up ahead of the Fed's rate decision. Investors will want to hear the Fed's thoughts on inflation and how high rates may have to go.

COVID infections in China, meanwhile, have led to the closure of factories and disrupted supply chains. Yields on 10-year Treasury notes fell to just under 3.396% after hitting nearly 3.5% on Tuesday. That's the highest level yields have been in over a decade. The Fed has gotten criticism for moving too slowly earlier to rein in inflation. But a stunning report on Friday brought upheaval to markets when it showed inflation at the consumer level unexpectedly accelerated last month. Yields on 10-year Treasury notes fell to just under 3.396% after hitting nearly 3.5% on Tuesday. That's the highest level yields have been in over a decade. Other central banks around the world are also raising interest rates, adding to the pressure. Japan’s central bank has kept rates near record lows. Even if central banks pull off the delicate trick of slowing the economy just enough to stamp out inflation, without a recession, higher interest rates push down on prices for investments regardless. The economy is still largely holding up amid a red-hot job market, but it has shown some signs of distress recently. It was down 5.6% at $21,367 in afternoon trading, according to CoinDesk. Its tumble has worsened as investors ramp up their expectations for how aggressively the Fed will move on interest rates. Its tumble has worsened as investors ramp up their expectations for how aggressively the Fed will move on interest rates.

Growth stocks lift Wall Street ahead of Fed's rate decision | Mint (Livemint)

Ten of the 11 major S&P sectors advanced in early trading, with nine of them up more than 1%. Leading the pack were consumer discretionary and financials, ...

Ten of the 11 major S&P sectors advanced in early trading, with nine of them up more than 1%. Leading the pack were consumer discretionary and financials, which rose 1.6% and 1.7%, respectively. Ten of the 11 major S&P sectors advanced in early trading, with nine of them up more than 1%. Leading the pack were consumer discretionary and financials, which rose 1.6% and 1.7%, respectively The S&P index recorded one new 52-week highs and 30 new lows, while the Nasdaq recorded seven new highs and 77 new lows. Advancing issues outnumbered decliners by a 5.79-to-1 ratio on the NYSE and by a 3.81-to-1 ratio on the Nasdaq. At 9:44 a.m. ET, the Dow Jones Industrial Average was up 315.84 points, or 1.04%, at 30,680.67, the S&P 500 was up 48.12 points, or 1.29%, at 3,783.60, and the Nasdaq Composite was up 179.38 points, or 1.66%, at 11,007.73. The benchmark S&P 500 index on Monday marked a more than 20% decline from its record closing high on Jan. 3, confirming it has been in a bear market, according to a commonly used definition. Traders are almost fully pricing in a 75 basis point hike from the Fed, up from 8.2% a week ago, according to CME's FedWatch Tool. Such a big hike would lift the Fed's short-term target policy rate to a range of 1.5% and 1.75%. "The Fed is going to go 75 basis points and attempt to talk very hawkish to try to regain control of the narrative, and when it's all over, investors will breathe a sigh of relief," said Zach Hill, head of portfolio strategy at Horizon Investments. Wall Street's main indexes climbed more than 1% on Wednesday, boosted by gains in beaten-down growth and financial stocks, with investors waiting to see how high the Federal Reserve would raise interest rates at its policy meeting to quell inflation.

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