empty
 
 
02.02.2023 11:59 PM
The implications of the Fed press conference for the markets

This image is no longer relevant

Federal Reserve Chairman Jerome Powell said policymakers expect a couple more interest rate hikes before suspending their aggressive tightening campaign, even as they slowed their efforts to rein in inflation.

Policymakers lifted the Fed's target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point increase in December and four giant hikes of 75 basis points before that.

Nevertheless, investors were receptive to the chair acknowledging that price pressures had begun to ease, even as he emphasized the Fed's outlook for further rate hikes. The S&P 500 closed more than 1% higher after his speech, and two-year yields fell sharply.

This image is no longer relevant

"We have covered a lot of ground," Powell told reporters after the meeting. "Even so, we have more work to do."

The Federal Open Market Committee's vote was unanimous.

"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time." the Fed said in a statement issued after the two-day decision.

In a sign that the end of the rate hike cycle may be near, the Committee said that the "extent of future increases" would depend on a number of factors, including cumulative tightening of monetary policy. It had previously linked the "pace" of future hikes to these factors.

Gold rose 3000p during the session:

This image is no longer relevant

Powell added during his press conference:

"We've raised rates four and a half percentage points, and we're talking about a couple of more rate hikes to get to that level we think is appropriately restrictive," he said.

In another departure from its last statement, the Fed noted that inflation has "eased somewhat but remains elevated," indicating that policymakers are becoming more confident that price pressures have peaked.

That compares with previous language when officials simply said price increases were "elevated."

"The heavy lifting is done, but it doesn't mean the job is finished," said Derek Tang, an economist at LH Meyer in Washington. "He'll err on the side of hiking a bit more and staying there a bit longer. He stuck to his risk management story of not wanting to test if they can get away with doing fewer hikes."

EURUSD added 1,500p in the session, rewriting the top of the month:

This image is no longer relevant

The Fed did not release new forecasts on Wednesday, but Powell referred to those forecasts as a benchmark for how much higher officials expect rates to rise.

Initially dismissing price increases as temporary, Fed policymakers have struggled to get rampant inflation under control before it takes root in the economy, raising rates sharply from near-zero levels as recently as a year ago.

They are also shrinking the Fed's balance sheet at a record pace, taking hundreds of billions of dollars out of the financial system.

"It is gratifying to see the disinflationary process underway, with continued strong labor market," Powell said. Still, the chairman said officials will need "much more evidence" that inflation is on a steady downward trajectory.

Powell focused on the labor market as a source of potential inflationary pressure, arguing that "demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time."

Andrey Shevchenko,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

GBP/USD. Overview for March 30. The pound and the euro continue to trade almost synchronously on an empty calendar.

On Wednesday, the GBP/USD currency pair spent nearly the entire day near the crucial Murray level of "6/8" (1.2329). The upward movement last time concluded around this level

Paolo Greco 10:21 2023-03-30 UTC+2

EUR/USD. Overview for March 30. The euro is aiming for a new round of correction against the background of an empty calendar.

The EUR/USD currency pair reached the Murray level of "1/8" (1.0864) on Wednesday once more, but it was unable to break through it and can now start a round

Paolo Greco 09:54 2023-03-30 UTC+2

The ECB is ready to raise the rate, but at a slower pace

European and British currencies have been in great demand in recent weeks. Although there was a lot of news during this period, I am not completely certain that this context

Chin Zhao 18:13 2023-03-29 UTC+2

EUR/USD to shoot up, but not too far

While ECB officials are talking, EURUSD continues to rise. No matter what, about the stability of the eurozone banking system, rate hikes, or even a slowdown in the monetary tightening

Marek Petkovich 17:30 2023-03-29 UTC+2

AUD/USD: Australia's inflation, risk appetite and southern prospects

The release of Australia's February inflation data put pressure on the Australian dollar today. Sellers attempted to pull the price to the bottom of the 66th figure, but they once

Irina Manzenko 17:13 2023-03-29 UTC+2

BlackRock expects Fed to keep rising rates despite banking turmoil

Black Rock Inc. is an international investment company headquartered in New York. It is one of the largest investment firms in the world and the largest in the world

Andrey Shevchenko 15:07 2023-03-29 UTC+2

What will happen to the dollar?

Despite some easing of the banking crisis, the potential for negative economic consequences remains. And it is not yet clear whether bank failures are limited only to SVB and Signature

Irina Yanina 14:03 2023-03-29 UTC+2

GBP/JPY: Sterling finds buyers

On March 28, the pound sterling periodically rolled back against the Japanese yen. But in the end, buyers took over the market. Note that the pair is very sensitive

Irina Yanina 13:30 2023-03-29 UTC+2

Gold's strength will be tested

The lack of news is already good news for the stock market. Shocks from the bankruptcy of three U.S. banks, the Credit Suisse takeover, and the problems of First Republic

Marek Petkovich 13:14 2023-03-29 UTC+2

EUR/USD creeping higher amid growing risk appetite. Game-changer could happen on Friday

EUR/USD has been creeping higher amid growing risk appetite, hawkish remarks from ECB policymakers, and dovish expectations of the Fed's further policy moves. This fundamental background enables the euro bulls

Irina Manzenko 12:02 2023-03-29 UTC+2
Can't speak right now?
Ask your question in the chat.