• CL-OIL


  • Cocoa-C


  • View more

Fed rate raised by 75 basis points; Fed acting swiftly to combat inflation


In response to Fed chairman Jerome Powell’s less hawkish remarks after the central bank’s monetary policy decision, US stocks jumped on Wednesday, regaining upside momentum and making a significant return. Wednesday, the US Federal Reserve stated that it had increased the main benchmark rate by 75 basis points to a range of 2.25 to 2.5%, which was in line with market expectations and imposed significant downward pressure on the US currency.

In the news conference, Powell also refuted the notion that the United States is in a recession, stating that the Federal Reserve is moving swiftly to combat inflation. The market’s fears of a recession have been allayed by the comments, which have worked as a tailwind for the equities markets. Fears of an energy crisis have increased in the Eurozone as a result of the German gas regulator’s statement that energy costs could increase considerably owing to the shutdown of the main Russian gas pipeline.

On Wednesday, both the S&P 500 and the Dow Jones Industrial Average climbed, as about 85% of S&P 500 companies rose and the Nasdaq 100 experienced its greatest one-day surge since November 2020. The S&P 500 increased by 2.6% on a daily basis, while the Dow Jones Industrial Average rose by 1.4%. The Communication Services and Information Technology sectors performed the best among all categories, growing 5.11% and 4.29%, respectively. All eleven sectors remained in positive territory. The Nasdaq 100 gained the most on Wednesday with a 4.3% increase, while the MSCI World index advanced 1.9% for the day.

Main Pairs Movement

Following the Federal Reserve’s rate decision, the dollar declined. As anticipated, the central bank upped the benchmark rate. Following the FOMC Press Conference, DXY dropped below 106.4. In addition to the Fed’s monetary policy decision, the market responded to chairman Jerome Powell’s comments in which he stated that he did not foresee a recession and sought to allay congress’ recession fears. Thursday’s announcement of the US’s GDP estimate for the second quarter will also be closely monitored by investors.

Wednesday saw a 1.08% increase in GBP/USD due to a lower US currency. Investors interpreted the Federal Reserve’s consecutive 75 basis point rate hikes and admission that production and spending slowed as “dovish.” After the FOMC meeting, the pound exceeds 1,218. EUR/USD surpassed 1.022 as well. Despite the intensifying oil crisis, cable grew 0.82%.

As a result of the Fed’s restrained comments on Wednesday, gold reached a day high above $1740. WTI recovered positive momentum and surpassed $97.6 per barrel.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDFOMC Statement02:00N/A
USDFed Interest Rate Decision02:002.50%
USDFOMC Press Conference02:30N/A
AUDRetail Sales (MoM) (Jun)09:300.5%
USDGDP (QoQ) (Q2)20:300.5%
USDInitial Jobless Claims20:30253K

Note: The information is provided for reference purposes only and doesn’t take into account your personal objectives, financial circumstances, or needs, and does not constitute investment advice. We encourage you to seek independent advice if necessary. VT Academy will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.