Fed July meeting HIGHLIGHTS: Jerome Powell-led FOMC decides to hike key rates by 25 bps as widely expected
Fed meeting HIGHLIGHTS: The Federal Reserve Chairman Jerome Powell-led Federal Open Market Committee (FOMC) - the US central banks benchmark interest rate-deciding panel - decided to raise US interest rates by a quarter of a percentage point on July 26, citing still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years. The latest rate hike, following a pause in June after 10 back-to-back increases, is the Feds 11th in its last 12 meetings, taking the benchmark overnight interest rate to the 5.25-5.50 per cent range.
Fed meeting HIGHLIGHTS: The Federal Reserve Chairman Jerome Powell-led Federal Open Market Committee (FOMC) — the US central bank's benchmark interest rate-deciding panel — decided to raise US interest rates by a quarter of a percentage point on July 26, citing still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years. The latest rate hike, following a pause in June after 10 back-to-back increases, is the Fed's 11th in its last 12 meetings, taking the benchmark overnight interest rate to the 5.25-5.50 per cent range.
The FOMC, the Fed said, will "continue to assess additional information and its implications for monetary policy". The US central bank's language was little changed from its June statement as it left its policy options open in search searches for a stopping point to the current tightening cycle.
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Inflation has fallen from last year's highs without serious damage to US economy: Jerome Powell
As the Fed enters a tricky period in its inflation fight, balancing the need for further rate increases against the risks of going too far, the Fed Chair says finishing the task on inflation will likely require some economic losses. He says a rate hike is possible at the September review.
"My base case is that we will be able to achieve inflation moving back down to our target without a really significant downturn that results in high levels of job losses," he says. "But it's a long way to be sure and we have a lot left ... Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions."
Fed staff drop US recession forecast, says Chairman Jerome Powell
Fed Chair Jerome Powell says the central bank's staff no longer forecasts a US recession. "We do have a shot" for inflation to return to target without high levels of job losses, he says.
Powell told a news conference after the Fed's latest interest-rate hike that there was "a lot left to go to" see such a soft landing. "So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession."
Fed rate hike as widely expected, economic lags of massive hikes will not necessarily require further Fed hikes beyond July: Emkay Global's Madhavi Arora
Madhavi Arora of Emkay Global points out that the only notable change to the post-meeting statement was an upgrade of the description of economic growth to “moderate”, from “modest” in June, and still added a bias toward “additional policy firming”. "While the statement had a hawkish bias, Chair Powell’s post-meeting presser tilted a little toward the dovish side. While noting the FOMC is not committed to further action, he stated he saw encouraging signs on labor markets and inflation. We maintain that the economic lags of massive hikes will not necessarily require further Fed hikes beyond July," Arora says.
"We respect the price action, but it remains the case that the rest of the global picture falls short of the conditions more historically associated with sustained dollar weakness... We do not fall in the dollar weakness camp. For us, the core of the dollar-bullish-to-neutral view has been global in nature, following China’s downdraft and the subsequent weakness in Europe in Q2," she adds.
FOMC describes US economy as growing at a "moderate" pace
That is still a slight upgrade from the "modest" pace seen as of the June meeting.
Fed Rate Hike | US central bank says inflation remains elevated
"The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy," the Fed says in language that is little changed from its June statement. This leaves the US central bank's policy options open as it searches for a stopping point to the current tightening cycle.
Though inflation data since the Fed's meeting in June has been weaker than expected, policymakers have been reluctant to alter their hawkish stance until there is more progress in reducing price pressures. Key measures of inflation remain more than double the central bank's target, and the economy by many measures, including a low 3.6 per cent unemployment rate, continues to outperform expectations given the rapid increase in interest rates.
Image: Reuters
Fed Hikes Rates | US central bank leaves door open to another hike
The Fed cites still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years. The latest rate hike, the Fed's 11th in its last 12 meetings, sets the benchmark overnight interest rate in the 5.25-5.50 per cent range, and the accompanying policy statement leaves the door open to another increase.
As it stated in June, the Fed says it will watch incoming data and study the impact of its rate hikes on the economy "in determining the extent of additional policy firming that may be appropriate" to reach its two per cent inflation target.
Fed Rate Hike | No Surprise | US stock market largely unchanged after Fed decision
Here's where the three Wall Street benchmarks stand minutes into the release of the Fed rate decision:
- Dow Jones Industrial Average: up 22.8 pts at 35,460.8
- S&P 500: down 9.5 pts or 0.2 per cent at 4,558
- Nasdaq Composite: down 52.2 pts or 0.4 per cent at 14,092.4
BREAKING | US benchmark rates hiked to 5.25-5.5%
BREAKING | FOMC decides unanimously to hike rates
BREAKING | Fed rate Decision | US central bank decides to hike key rates by 25 bps
Here's a summary of Fed rate decisions in the current cycle of monetary policy tightening
FOMC meeting date Rate revision (bps) Federal funds rate May 3, 2023 +25 5.00% to 5.25% March 22, 2023 +25 4.75% to 5.00% Feb 1, 2023 +25 4.50% to 4.75% Dec 14, 2022 +50 4.25% to 4.50% Nov 2, 2022 +75 3.75% to 4.00% Sept 21, 2022 +75 3.00% to 3.25% July 27, 2022 +75 2.25% to 2.50% June 16, 2022 +75 1.50% to 1.75% May 5, 2022 +50 0.75% to 1.00% March 17, 2022 +25 0.25% to 0.50% Fed Rate Decision Today | S&P 500, Nasdaq slide amid Big Tech results; Microsoft shares fall 4%
The S&P 500 and the Nasdaq Composite edge lower as investors assess mixed earnings from Microsoft and Alphabet ahead of a Fed rate hike that could push borrowing costs to their highest since the global financial crisis.
Microsoft shares fall four per cent after the company lays out an aggressive spending plan to meet demand for its new artificial intelligence (AI)-powered services. The Windows maker still surpassed estimates for quarterly revenue and profit. Here's where the three main US stock market benchmarks stand three-and-a-half hours into the opening bell:
- Dow Jones: up 7.4 pts at 35,445.5
- S&P 500: down 12.6 pts or 0.3 per cent at 4,554.8
- Nasdaq Composite: down 74.5 pts or 0.5 per cent at 14,070
Sensex rose 351 pts to end at 66,707, Nifty at 19,778 amid broad-based gains
Earlier in the day, Indian equity benchmarks settled half a per cent higher backed by broad-based gains. The Sensex rose 351.5 points to end at 66,707.2 and the Nifty added 97.7 points to settle at 19,778.3, with oil & gas, FMCG and IT shares being at the forefront of the upmove.
Here's how the indices moved through the day:
Nifty
European shares fall after six-day winning run; LVMH tumbles
European equities are set to snap a six-day winning run, hurt by underwhelming results from French luxury goods giant LVMH as well as nerves ahead of the Fed's interest rate decision later in the day.
The pan-European STOXX 600 index is down 0.8 per cent at this hour. On Tuesday, the index registered its longest winning streak since January. Here's what some of the key indices in the region look like:
- The UK's FTSE 100: down 0.6 per cent
- France's CAC: down 1.9 per cent
- Germany's DAX: down 0.8 per cent
Fed Rate Decision Today | Dow Jones, S&P 500, Nasdaq futures suggest a weak start on Wall Street today
The US stock market is set for a negative start as investors return to trade at 7 pm India time today, as indicated by the futures contracts of the three main Wall Street indices: the Dow Jones, the S&P 500 and the Nasdaq Composite. Here's how the three contracts fare at this hour:
- Dow Jones futures: down 92 pts or 0.3 per cent at 35,512
- S&P 500 futures: down 9.3 pts or 0.2 per cent at 4,586.8
- Nasdaq futures: down 52.3 pts or 0.3 per cent at 15,620.8
Catch latest stock market updates here
Fed Rate Decision Due Today | US central bank poised to hike rates as markets anticipate inflation endgame
In assessing where policy may move next, the Fed will be balancing whether the economy remains too strong to return a still-elevated rate of inflation to the US central bank's 2 per cent target against evidence that a process of "disinflation" may be underway that is likely to continue even without any further rate increases.
Read more on what to expect from Fed's July reviewIn June, FOMC decided to leave key US interest rate unchanged after 10 back-to-back hikes
The FOMC decided unanimously to keep the Fed funds rate — or the benchmark US interest rate — unchanged at 5-5.25 per cent at the end of its scheduled review last month, a first pause in 15 months of back-to-back increases totaling 500 basis points.
The US central bank’s decision on the key interest rate was in line with the expectations of the markets as well as economists.
Is another interest rate hike on the cards for the world's largest economy?
An increase, anticipated by investors with nearly a 100 per cent probability, would raise the benchmark overnight interest rate to the 5.25-5.50 per cent range, roughly the highest level since the approach to the 2007-2009 financial crisis and recession, according to news agency Reuters.
Fed to reveal rate decision at 11:30 pm India time
The Federal Reserve is widely expected to raise interest rates by a quarter of a percentage point when it releases its monetary policy statement, at 11:30 pm India time. A hike will be the 11th upwards revision in the US benchmark interest rate in 12 back-to-back scheduled reviews.
Analysts also believe such a hike will possibly be the last one in the current cycle of monetary policy tightening in a bid to tame red-hot inflation.
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