Fed minutes may set tone for US stock market till year-end | The Financial Express

Fed minutes may set tone for US stock market till year-end

After four consecutive rate hikes of 75 basis points, the Fed is expected to hike rates by 50 bps in December’s FOMC meeting.

Fed minutes may set tone for US stock market till year-end
The Federal Reserve won’t meet again until the next rate-setting meeting in mid-December.

Global markets were waiting for the FOMC minutes to unravel what the Fed officials were thinking about the interest rate hikes. And, they did get to hear what they wanted to know to confirm their views. The Federal Reserve’s most recent meeting minutes revealed that the majority of policymakers supported lowering the pace of interest-rate hikes shortly, which helped US markets end the session higher. Dow 30 was up by 95 points or 0.28%, S&P 500 closed higher by 0.59%, while Nasdaq Composite also gained 0.99% at Tuesday’s close.

Fed has been on an unprecedented rate hike having jacked up the rates by 375 basis points so far in 2022. After four consecutive rate hikes of 75 basis points, the Fed is expected to hike rates by 50 bps in December’s FOMC meeting.
On November 1-2, when the Fed FOMC raised the federal funds rate by 75 bps, the minutes of the meeting released on November 23 show several Fed officials backed the need to moderate the pace of rate hikes. Overall, the minutes were cautious because they noted a decline in consumer demand and tighter global economic and financial circumstances.

With Fed showing intention to slow down the pace of rate hikes, the markets turned bullish. “The Federal Reserve’s minutes of their last meeting add fuel to increasing market excitement,” says Nigel Green, CEO, deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.

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Today, on Thursday, November 24, the US stock market is closed on account of the Thanksgiving holiday. It will be a shortened week for traders and investors as tomorrow November 25, the markets will close at 1 pm EST on account of Black Friday. “This suggestion of smaller rate rises to come will certainly buoy stock markets, although the immediate positive impact will be muted somewhat by lighter-than-usual trading volumes because of the Thanksgiving holiday on Thursday,” says Green.

However, the FOMC minutes revealed something that was known to the markets. This was evident from Powell’s remarks on November 2 when he said about slowing down of the pace of rate hikes and a higher terminal rate than what was expected earlier.

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Now, the focus could shift to the US CPI data announcement on December 13 and the Fed’s FOMC meeting on December 13-14. How 2022 will end for the US stock market will depend a lot on what transpires in mid-December. Nigel Green concludes: “The Federal Reserve won’t meet again until the next rate-setting meeting in mid-December, but with stock markets being forward-focused, these latest minutes will pretty much set the mood until the end of 2022.”

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First published on: 24-11-2022 at 21:31 IST