The markets focus this week was on the Fed’s latest monetary policy decision. Yesterday the FOMC announced a 50 basis point rate hike, the largest since 2000. This highly expected rate rise pushed the Fed’s benchmark interest rate from a range of 0.25%-0.5% to a range of 0.75%-1%.
The Fed’s dual mandate to maximise employment and reach price stability remains the guide of the Federal Open Market Committee’s decisions. Inflation in March 2022 increased to 8.5%, up from 7.9% in February and the highest since December 1981. The need to tame inflation is putting pressure on policy makers.
“Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the Committee that additional 50 basis point increases should be on the table at the next couple of meetings,” said Chair Powell during the press conference.
Markets were largely anticipating the move which appeared weaker than expected. The FED’s decision was welcomed with sharp increase in stock markets. Among US major indices, DOW closed the day at +2.81%, S&P500 at +3% and NASDAQ surged even further at +3.19%.
At the end of the FED’s press conference the euro was trading higher against the US dollar at 1.06.