News

Published: Mar 23, 2023
Updated: Mar 23, 2023

Fed Raises Interest Rates and Indicates More to Come, US Markets React Negatively

The Federal Reserve (Fed) has raised interest rates by 25 basis points for the ninth consecutive meeting, bringing the range to 4.75% to 5%. The unanimous vote by the Federal Open Market Committee (FOMC) suggests that there may be further rate hikes in the future. The Fed is confident that its efforts to combat inflation will hold up despite the banking crisis.

Yellen's Comment Causes Concern

US Finance Minister Yellen's comment about not considering insuring all uninsured bank accounts has added fuel to the fire. This statement has caused concern, particularly among those who worry about a potential banking crisis. However, it is important to note that the Fed remains confident in its ability to combat inflation.

Mixed Projections from Fed

The Fed's Summary of Economic Projections shows that there was little change, with 2023 and 2024 real GDP forecasts downgraded, and core PCE inflation expectations increased from 3.5% to 3.6%. Powell, the Fed Chairman, has suggested that additional rate hikes may be necessary in the future.

US Markets React Negatively

US markets reacted negatively to the news, with the S&P 500, DowJones, and Nasdaq all down by around 1.5%, while the Russell2000 and Real Estate Index experienced more significant declines of 2.83% and 3.64% respectively. The financial index also saw a decline of 2.37%, while gold rose by 1.66%.

Powell discards hopes of rate cuts

The Fed's decision to raise interest rates and indicate more hikes to come has caused concern in the markets. However, it is important to note that the Fed remains confident in its ability to combat inflation. The mixed projections and negative market reaction suggest that there is still uncertainty about the future of the US economy. As always, investors should exercise caution and consider the potential risks before making any investment decisions