Fed raised rates by 75 bps: Fed’s responding to backward-looking indicator
Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >
Jun 15, 2022
Western Asset’s John Bellows says it might prove out to be a mistake.
The S&P 500 index is up roughly 3.0% following the FOMC meeting.
The S&P 500 index is up nearly 3.0% on Wednesday after the U.S. Federal Reserve announced its biggest rate hike since 1994.
A brief recap of the FOMC meeting
Benchmark interest rates raised by 75 basis pointsA 50 – 75 bps increase expected in the July meetingYear-end target for the federal funds rate lifted to 3.4%Outlook for economic growth in 2022 lowered to 1.7%
The benchmark rate is now in the range of 1.5% to 1.75% – highest since the first quarter of 2020. FOMC remains confident that headline inflation will come down sharply in 2023 to 2.6%. Chair Jerome Powell said:
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
I do not expect moves of this size to be common. But we’ll make decisions meeting by meeting and we’ll continue to communicate our thinking as clearly as we can. We want to see progress. If we don’t see progress, that could cause us to react.
Expert reacts to the 75-bps increase
Reacting to the rate hike on CNBC’s “Power Lunch”, John Bellows (Portfolio Manager at Western Asset) said there’s a risk that a 75 basis points increase will prove out to be a mistake.
Fed is responding to last week’s CPI print that, at least parts of it, tend to be backward looking. So, the risk is, they’re responding to backward-looking indicator while forward-looking indicators do signal a turn in activity and probably in prices.
U.S. inflation hit a new forty-year high of 8.6% in May versus the Dow Jones estimate of 8.3%.
75.26% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Stocks & Shares