Federal Reserve's Recent Interest Rate Hike and its Impact | 2.1
The Federal Reserve raised the target range for the federal funds rate by 0.25% to 4.5%–4.75% in its February 2023 meeting. This was a smaller increase than the previous meeting and pushed borrowing costs to the highest level since 2007. Policymakers expect to raise the target range further to reach a restrictive monetary policy that will help bring inflation to 2%. The Fed Chair, Powell, said that the disinflation process has just started and that interest rates are not yet restrictive enough. The dollar index fell 1% after the announcement as investors saw a more dovish tone from the Fed. The future of interest rates will depend on the cumulative impact of monetary policy, economic and financial developments, and the time it takes for monetary policy to affect the economy and inflation.
The stock market reacted positively to Powell's comments, with the Dow, S&P 500, and Nasdaq 100 all finishing higher. Companies like Snap, Peloton, and Advanced Micro Devices also had significant changes in their stock prices after reporting earnings. The US Stock Market Index (US30) is expected to be at 32863.60 points at the end of the quarter and 29734.22 in 12 months.
The ISM Manufacturing PMI fell to 47.4 in January, the lowest since May 2020 during the height of the COVID-19 pandemic. This indicated a third consecutive contraction in factory activity as companies slowed their output to match demand and prepare for growth in the second half of 2023. Other indicators such as new orders, production, and backlogs of orders also declined, while supplier deliveries and the price index increased. Employment rose slightly, but companies are positive about the future and do not plan to substantially reduce headcounts.
The stock market reacted positively to Powell's comments, with the Dow, S&P 500, and Nasdaq 100 all finishing higher. Companies like Snap, Peloton, and Advanced Micro Devices also had significant changes in their stock prices after reporting earnings. The US Stock Market Index (US30) is expected to be at 32863.60 points at the end of the quarter and 29734.22 in 12 months.
The ISM Manufacturing PMI fell to 47.4 in January, the lowest since May 2020 during the height of the COVID-19 pandemic. This indicated a third consecutive contraction in factory activity as companies slowed their output to match demand and prepare for growth in the second half of 2023. Other indicators such as new orders, production, and backlogs of orders also declined, while supplier deliveries and the price index increased. Employment rose slightly, but companies are positive about the future and do not plan to substantially reduce headcounts.
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