U.S Interest Rates Set to Continue

The U.S Federal Reserve chair Jerome Powell made it clear that the FOMC will aggressively continue tightening monetary policy for longer, slamming the breaks in hopes of a near-term pause.

The central bank increased interest rates for a fourth straight 0.75% on Wednesday, bringing the target rate to 375-400 basis points with more in store. Despite interest rates being at levels last seen in 2008, the Fed is committed to bringing down inflation #CPI back to its 2% target at all costs.

Chair Powell stated in the FOMC presser that it is very premature to consider pausing interest rate hikes as rates would likely be higher than expected. This has placed the spotlight firmly on the December meeting, with a 50 to 75-point hike most likely on the cards. Market participants are already looking toward the dot plot, indicating the Fed could continue raising rates beyond February 2023.

The initial market reaction after the announcement saw the S&P 500 up almost 1% but quickly moved significantly lower as the press conference continued and the information started to sink in. U.S Bond yields are pushing higher, with the U.S 2-year and 10-year Treasury yields higher at 4.628% and 4.115%, respectively. The U.S Dollar is set to continue strengthening from here, which could continue to pressure consumers well beyond the festive season.