As Expected
The day we were all waiting for has finally come. Although the Fed’s move has been expected for about a few weeks now, interest rates are just one part of the meeting, with monetary policymakers sharing their views on the economy and giving us extra information to help clean our lenses.
To start off, the Fed increased interest rates by three-quarters of a percentage point, which was news a couple of weeks ago. This level was last seen in 2019 when the economy was slowing down, and chair Jerome Powell said that they noticed the economy has slowed since the last meeting, keeping that trend. Interest rate futures tell us that investors expect the Fed to increase rates up to 3.5% by the end of the year before reducing them.
Powell said that he believes the US is not facing a recession right now, although the GDP numbers from yesterday might meet the definition of two straight quarters of contraction in the economy. The Fed wasn’t fazed by the slowdown in job growth as they believe that the market is very tight, and in their view slowed growth is a good sign. Powell has stressed that his number one goal is to bring inflation down and prices back to normal, even if the US has to go through a recession for that to occur, and that has caused mixed opinions. The markets were up about 1 to 2 percent before the Federal Reserve announcement, and they finished the day up 3 to 4 percent as investors loved the commentary. With more economic data ahead, we’ll see if this rally is temporary or not.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
