FOMC Lift rates with only 0.50 % as expected
0.5% increased rates were taken by Markets with lots of optimism because Powell announced 75 BP hikes off the table for next two meetings. Sentiment was RISK-ON, instead of rate increases because trader's already priced in 0.5%.
Market Evolution NY Closed:
- S&P 500 up 122 points to 4298, or 2.9%
- Nasdaq +3.1%
- DJIA +2.8%
- DXY 0.15%
- VIX -13%
Taking out of the table 75 BP hike, for next two meetings, Powel will sustain a new bounce into risk assets but I think it's short-term (1-2 weeks) until it will have new inputs from economies. Anyways, FOMC meeting, it's a fundamental shift for Risk instruments.
In the currency markets we see movement according to the risk sentiment: AUD & NZD UP and JPY & CHF down.
Some important remarks from Powell press conference regarding economic statement:
- Inflation is much too high
- It's essential we bring inflation down to keep a strong labor market
- Price pressures have spread to a broader range of goods and services
- Wages are rising at the fastest pace in many years
- The labor market is 'extremely' tight
- There is a broad consensus that 50 bps hikes should be on the table at the next couple meetings
- We are prepared to adjust any of the details or our approach
- Lockdowns in China are likely to further snarl supply chains
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