US Federal Reserve Update: After a poor run in February, US stocks continues to decline in March. The one big thing troubling the investor is – how high will the rates go? As a result of a gauge of prices received by US manufacturers in February increasing more than anticipated, the market for bets on the Federal Reserve’s policy rate is pricing in a higher peak of 5.5% in September. A full percentage point above the current effective fed funds rate, the rate on the September overnight index swap contract increased to 5.52%. Traders of futures tied to the Fed’s policy rate saw about an even chance that the rate will get to a range of 5.5%-5.75% by September, from the current range of 4.5% to 4.75%.
After a weak performance in February, Wall Street indexes began March on a volatile note as fresh evidence of persistent price pressures and comments from Federal Reserve policymakers fueled worries about the U.S. central bank staying hawkish for longer. US stocks fell for the second day in a row as investors reconsidered their bets on peak rates after economic data revealed persistent inflationary pressures and Federal Reserve officials remained hawkish.
Also Read: When is the next US Fed rate hike meeting in March?
On Thursday, the dollar index rose above 104, recovering some of the losses from the previous session as Federal Reserve officials stated that additional efforts are needed to reduce inflation.
Raphael Bostic, the president of the Atlanta
Also Read: US CPI data for February – Know the time and release date in March
In the meantime, the dollar dropped 0.5 percent on Wednesday as a result of strong industrial data from China and blazing inflation figures from Germany. Investors also reacted to the most recent ISM survey, which revealed that the US manufacturing sector shrank in February for the fourth straight month. Investors are currently awaiting weekly jobless claims.
Despite the Fed boosting interest rates by 450 basis points since then, the inflation rate, which reached multi-decade high levels of 9.1% in 2022, is still high. Surprisingly, the US CPI statistics for January showed a 6.4% increase from the 6.5% recorded in December, a little decline.
One of the Fed’s biggest challenges is to bring inflation down without leading the economy into a recession. The risks of sustained high inflation are highlighted by the sharp rise in the personal consumption expenditures index. Fed Chair Jerome Powell is raising interest rates while also making sure it has no negative effects on the economy in an effort to reduce the level of inflation.