The Fed provided enough clues that the Fed is about to end its tightening cycle, and US stocks soared initially. The Fed Chair Powell reminded stock markets that inflation was high for 18 months, and it is too early to contemplate a pause on rate hikes. Stocks were unable to sustain their gains. This is because the Fed’s risk of raising rates above 5.00% could cause stock market problems.
It looked like Christmas was coming early for Wall Street, as the Fed suggested they were getting closer to slowing down their tightening pace. Initial Fed fund futures were more optimistic that December would see a half-point rate increase.
A fourth consecutive 75-basis points rate hike by the Fed brought the benchmark federal funds rates to a range between 3.75% and 4.0%. They may have planned a few more rate increases for this year, with the total rate hikes now at 375bps.
The Fed’s dovish statement stated that they will take into consideration the cumulative tightening and the lags in which monetary intervention affects economic activity, inflation, and other economic and financial developments.
The statement’s hawkish aspect was that they anticipated…