FOMC Meeting 2023: Fed hikes policy rates by 25bps; ongoing increase in target range "appropriate" to achieve 2% inflation
FOMC Meeting 2023: US Federal Reserve on Wednesday raised interest rates by 25bps taking the range to 4.50-4.75 per cent. The decision was taken during the Federal Open Market Committee (FOMC) meeting which began on Tuesday, 31 January 2023. The meeting concluded on 1 February and was followed by a press conference by Fed Chair Jerome Powell.
US markets were trading mix, albeit with relative stability around this time. Nasdaq Composite was up 1.50 per cent while S&P 500 was higher by 0.77 per cent, Dow 30 recovered from early losses and was trading flat at 34,081.20.
The 12-member committee toned down pace of interest rate hike, a glimpse of which was seen in the December Monetary Policy where the US Central Bank had raised rates by 50bps to bring the range at 4.25-4.50 per cent, in line with the street's expectations.
Powell had then indicated that the Fed could consider raising interest rates by 75bps through 2023.
Tomorrow at 2:30 p.m. ET: Chair Powell hosts live #FOMC press conference: https://t.co/1uJrua5Yif pic.twitter.com/99opJIslvV
— Federal Reserve (@federalreserve) January 31, 2023
Catch all the updates and developments leading to the big event, here. For all other news related to stock markets, business, economy, India Budget 2023, sports, tech and much more, visit Zeebiz.com.
FOMC Meeting 2023: US Federal Reserve on Wednesday raised interest rates by 25bps taking the range to 4.50-4.75 per cent. The decision was taken during the Federal Open Market Committee (FOMC) meeting which began on Tuesday, 31 January 2023. The meeting concluded on 1 February and was followed by a press conference by Fed Chair Jerome Powell.
US markets were trading mix, albeit with relative stability around this time. Nasdaq Composite was up 1.50 per cent while S&P 500 was higher by 0.77 per cent, Dow 30 recovered from early losses and was trading flat at 34,081.20.
The 12-member committee toned down pace of interest rate hike, a glimpse of which was seen in the December Monetary Policy where the US Central Bank had raised rates by 50bps to bring the range at 4.25-4.50 per cent, in line with the street's expectations.
Powell had then indicated that the Fed could consider raising interest rates by 75bps through 2023.
Tomorrow at 2:30 p.m. ET: Chair Powell hosts live #FOMC press conference: https://t.co/1uJrua5Yif pic.twitter.com/99opJIslvV
— Federal Reserve (@federalreserve) January 31, 2023
Catch all the updates and developments leading to the big event, here. For all other news related to stock markets, business, economy, India Budget 2023, sports, tech and much more, visit Zeebiz.com.
Latest Updates
FOMC Policy Outcome - FULL TEXT
"Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation has eased somewhat but remains elevated. Russia’s war against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty. The Committee is highly attentive to inflation risks. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-1/2 to 4-3/4 percent."
"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."
"In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
"In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgagebacked securities, as described in its previously announced plans."
"The Committee is strongly committed to returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that (more) -2- could impede the attainment of the Committee’s goals."
"The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
US Fed: I dont see the commitee cutting rates unless there are clear indications of inflation coming down in sustained way
US Fed on Stagflation situation: Dont want to go to hypotheticals
US Fed: We are missing on inflation and missing by a lot. The focus is clearly on bringing the inflation down
US Fed: We don't see participation moving up despite very tight labour markets, higher wages
US Fed: We are highly committed to brinng down inflation and "I" believe we could do so
US Fed: We will keep are inflation target at 2 per cent
Wall Street Snapshot
Source: Comex
US Fed: Labour market is significantly strong;
US Fed: Higher rates to increase unemployment, lower growth resulting reduction in inflation
US Fed: FOMC participlants believe that inflation trajectory is on the upside
US Fed: we have raised 425 bps this year; next hikes will depend on data, financial data
US Fed: 50bps interest rate hike in 2023
US Fed: We believe that there is still some time before inflation comes down
US Fed: Services inflation is unlikley to come down soon
US Fed: We have got growth at a modest level
US Fed: Financial Conditions have tightened over the course of 1 year; Our focus is not based on short term moves
US Fed: Price stability remains a priority; we will do any thing to achieve price stability, maximum employment goal
US Fed PC LIVE
US Fed: Inflation has cooled down; but that is not gound for complacency
US Fed: Policy guided by maximum employment
US Fed: Inflation impacts purchasing power of the people
US Fed: Financial conditions have tightened over the course of 1 year
US FED Char Jerome Powell: We understand the hardships of the people
US FED Char Jerome Powell: working to reduce the size of balance sheet
US FED Char Jerome Powell: US Economy has signifcant lowered
US FED Char Jerome Powell: Interest rate hike 25 per cent
US FED Char Jerome Powell: Job market remains elevated with wages remaing elevated
US FED Char Jerome Powell: Labour force participation little changed
Recent economic data presents mixed picture
-- A series of economic data shows signs of sluggishness in the US economy indicating the Fed fight against soaring inflation is bearing fruit but at the cost of economic slowdown. If we look at recent economic data from the US, activities in manufacturing and services sector contracted. Moreover, US CPI data eased for sixth consecutive month and came down to 6.8% from a four decade high of 9.1%. Core PCE Price index, Fed preferred inflation gauge, also indicated ebbing price pressure. Along with it, housing markets have started crumbling due to higher rates
-- However, strong labour market is not a good sign in combat against inflation but the easing of wage growth is a blessing, which should be a major variable, going forward
-- Recent US GDP data was above market expectations albeit down slightly compared to previous quarters. However, the market reaction suggests that the current state of the economy is strong and there should not be a hard landing due to increased rate hikes
Recap of US Federal Reserve monetary policy: December 2022
-- The US Federal Reserve raised interest rates by 50 bps to a range between 4.25% and 4.50% and signalled that the magnitude of the hikes may be smaller but may ultimately move to higher levels than anticipated
-- FOMC also said it would continue with its balance sheet reduction as announced in May 2022
-- US Federal Reserve Chair Jerome Powell had said no officials had projected rate cuts next year and they were unlikely to consider lowering interest rates until policy makers are confident inflation is moving down to the Fed’s 2% goal in a sustained fashion
Inputs from ICICI Securities
SGX Nifty Intraday Chart
Source: Comex