Wall Street down, in the aftermath of yet another maxi rate hike by the Fed by Jerome Powell, equal to +75 basis points for the third consecutive time.
Goal confirmed yesterday by Powell: to move forward in the path of monetary tightening, in order to bring US inflation back to the 2% target (it is now traveling at a rate above 8%, based on what emerges from the consumer price index ).
At about 3.40 pm Italian time, the Dow Jones lost more than 110 points (-0.36%); the S&P 500 fell 0.54%, while the Nasdaq Composite fell 0.82%.
The Federal Reserve has raised rates in the range between 3% and 3.25%, the record since 2008. Watch out for the dot plot, the table that summarizes the projections on the direction of rates of the exponents of the FOMC, the policy arm monetary policy of the Fed.
The document shows that officials are aiming for new rate hikes to reach the terminal rate of 4.6% in 2023, expecting rates to rise to 4.4% by the end of 2022.
Powell & Co would therefore be preparing to raise rates by + 100-125 basis points by the end of 2022, in the two remaining FOMC meetings.
Also from the dot plot, up to three rate cuts emerged in 2024 and another four in 2025, which would lead to longer-term rates to fall to a median value of 2.9%.
“My main message has not changed since Jackson Hole – said Powell, in the press conference that followed the announcement on US rates – The FOMC is strongly determined to bring inflation back to 2%, we will continue until the job will be completed “.
“We have to put inflation behind us. I wish there was a less painful way to do it. There isn’t, ”admitted the president of the US central bank.
Today was the day in which central banks were the protagonists.
Haruhiko Kuroda’s Bank of Japan continues to confirm itself as a white fly among the central banks of many other economies, committed to averting and taming new flares of inflation. Today the BOJ confirmed the reference interest rates at the minimum level ever, or at -0.1%, which means that the monetary policy made in Japan is still based on the instrument of negative rates, at which Christine’s ECB Lagarde has now given up on her monetary straits.
On the other hand, the era of negative rates in Switzerland is over, where the Swiss National Bank (SNB) raised its reference interest rates to 0.5%, with an increase of 75 basis points.
Inflation in Switzerland is currently at its highest in three decades, having risen to 3.5% last month.
The Bank of England also announced today that it has raised the UK’s key benchmark rate by 50 basis points, less than the 75-point squeeze expected by several traders, to 2.25% from 1. , 75% earlier. The monetary tightening was the seventh in a row and has brought rates to the record of the last 14 years, or since 2008.
The Bank of England announced today that it believes the UK is already in a recession.
Yesterday the Dow Jones Industrial Average slipped 522 points (-1.70%), after leaping more than 300 points in its intraday highs; the S&P 500 lost 1.71%, the Nasdaq Composite fell 1.79%.
Prospects for a Fed that tolerates recession more than inflation inflames US Treasury rates again:
those in two years, more sensitive to the Fed’s monetary policy decisions, jumped up to 4.132%, the record since October 2007, and then made a slight turnaround (up in any case by almost 10 basis points), to 4.092% .
10-year Treasury rates have soared to 3.64% in the last few hours, a record since February 2011.
The spread between 10-year and two-year Treasury rates widened further to 56.8 basis points, confirming the further inversion of the yield curve, a phenomenon which, according to many economists, anticipates the arrival of a recession.