The most anticipated event in the last few months happened on Wednesday with the Federal Reserve policy meeting. With the inflation crisis getting worse and worse as time flies, everyone has been looking at the scale at which the Fed increases interest rates and predicting what would happen. As a result, we’ve seen some of the most volatile days in recent times both ways, but the market has been down overall with the negative sentiment overpowering the positive on the basis of data.
At the meeting, Fed chair Jerome Powell announced that they will be raising interest rates by half of a percentage point, the most aggressive rate hike since 2000 when the tech bubble started to pop. Now, interest rates will sit between 0.75% and 1%, and the decision was approved unanimously by the committee, showing their determination to kick inflation down the drain. Plans were finalized to reduce their asset portfolio, which has been discussed for the past few months, and lockdowns in China were identified as a major inflation risk factor, which displays the battle that’s still ahead. This all sounds like the negative market sentiment were justified after all, but Powell gave relief to investors in his speech. Powell said that the Fed is not looking to make major rate increases despite investors fearing that, stressing that the Fed would only move in increases of 0.25% and 0.5% like Wednesday’s hike. This gave the markets the relief that it needed, sending indices on a 4 percent run from noon to close, but this is simply the start of the battle, and this is a rate increase in the end.
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.