Wall Street eases gains after 75 bps hike
The Federal Reserve raised the target for the fed funds rate by 75 basis points to 1.5%-1.75% during its June meeting, after the inflation rate unexpectedly accelerated last month to 41-year highs. Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is strongly committed to returning inflation to its 2 percent objective.
Key takeaways from the statement:
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app- Quite a large increase in expectations of an increase in interest rates (3.4% this year and 3.8% next year), which probably means another hike of 75 bp
- The considerable increase in inflation projections shows that the Fed admits that the situation is very tense, which requires strong interest rate hikes
- The Fed in the statement strongly indicates that it is focused on bringing inflation back to the target, especially taking into account the strong labor market and good economic prospects
- 5 members see interest rates at 4% in 2023
- In 2023, the first interest rate cuts will be possible, inflation will not return to the target in 2024
- Inflation projections for 2023 show a strong decline in inflation, to a range below 3%, although from a much larger base of over 5% for 2022
Source: FED
Source: FED
US500 failed to break above resistance at 3800 pts and resumed downward move. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
