What Wall Street had to say about the U.S. Fed's rate hike
BNN Bloomberg
Wall Street widely expected the Federal Reserve to raise interest rates by 25 basis points, which is exactly what happened. But equity investors debated conflicting messages: the policy guidance shifted from “ongoing” rate increases to “some additional” policy firming, though Chair Jerome Powell said that the Fed’s hands aren’t tied.
Stocks gained in the immediate aftermath and then sank. Treasuries and the dollar fell. Investors pouring over the Fed’s Summary of Economic Projections didn’t get much help there, since the Fed’s expectations for unemployment and inflation were little changed.
While Chair Powell said in his news conference that the policymakers had weighed a pause in rate hikes ahead of their meeting, the Fed remained focused on the risks of high inflation even as it watched developments in the banking system. “If we need to raise rates higher, we will,” he said.
“This is about as hawkish as the Fed can be given the banking sector stresses that are ongoing,” said Win Thin, global head of currency strategy at BBH. “To me, the statement is similar to what the ECB said. That is, once we get past the banking sector stresses, the tightening cycle likely remains intact.”
