The First Slice for Thursday, September 22, 2022

U.S. stock indexes finished sharply lower on Wednesday after see-sawing between gains and losses as the Federal Reserve announced another expected sharp interest rate increase and signaled a higher-than-expected peak for rates.

  • The Dow fell -522.45 or -1.70%
  • The S&P 500 finished lower -66.00 or -1.71%
  • The Nasdaq lost -204.86 or -1.79%

The Federal Reserve increased its policy interest rate by 75 basis points to a target range of 3% to 3.25% on Wednesday afternoon, while penciling in another 125 basis points in rate hikes by year-end, which would bring the benchmark rate to a midpoint of 4.4% by the end of the year, up from the prior estimate in June of 3.8%. 

The central bank has swiftly raised borrowing costs from near zero earlier in the year as it strives to combat inflation that is currently 8.3%, near multi-decade highs.

Investors are closely watching policymakers’ projections of monetary tightening in the so-called “dot plot” of interest rates for the rest of 2022 and the following years, which should give them a glimpse of how high they will go in the future. According to the statement, the central bankers now see a median “terminal” rate of 4.6% in 2023 but don’t see any rate cuts until 2024. 

Meanwhile, in updated forecasts, the Fed predicts the economy will grow at a meager 0.2% annual pace this year and a lackluster 1.2% next year — well below the outsized 5.7% gain in 2021. The unemployment rate, meanwhile, is forecast to rise to as high as 4.4% in 2023 and stay there through 2024.

U.S. stocks were volatile after the release, with the Dow Jones Industrial Average sliding more than 500 points, after swinging between gains and losses following the Fed’s rate decision.

With inflation rising globally in the wake of the coronavirus pandemic, about 90 central banks have raised interest rates this year in the broadest tightening of monetary policy for 15 years. This week alone, the Fed lifted its key rate by 75 basis points for a third time while the Bank of England is predicted to boost its benchmark by 50 basis points, and hikes are also expected in Indonesia, Norway, the Philippines, Sweden, and Switzerland, among countries. 

Also suppressing sentiment on Wednesday was news that Russian President Vladimir Putin had called for partial military mobilization of the country to prosecute his attack on Ukraine. The announcement, which included threats against the West, raised fears of a further escalation in the conflict.

Precious metals traded higher with gold for December delivery rising $4.60, or 0.3%, to settle at $1,675.70 an ounce on Comex. The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, advanced 0.5% on Wednesday…….Click here to read the source article[read more]

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