As was largely predicted, the Federal Reserve increased interest rates by 25 basis points, in the first FOMC meeting held in 2023. The Fed’s latest hike brings that Federal funds rate to a range of 4.50% to 4.75%. Since March 2022, the US Fed has raised interest rates by 450bps and more rate hikes are expected in 2023. Stock market investors are expecting any pause or rate cut in 2024 and not before that as Fed Chief had already signalled towards that.
As Meta shares soared on a positive quarterly report, Nasdaq futures increased on Thursday, adding to gains made on Wednesday during the regular session amid a Fed-instigated technology rally. While Dow futures were unchanged, the Nasdaq 100 and S&P 500 futures both increased by 1% and 0.5%, respectively. After reporting stronger-than-expected fourth sales and announcing a $40 billion stock repurchase, Meta increased by about 20% in pre-market trade.
As the US Federal Reserve scaled back the extent of its rate hike and declared that it has made success in the fight against inflation, the Nikkei 225 Index increased 0.3% to over 27,400 on Thursday, extending gains from the previous session and taking cues from a strong lead on Wall Street. In regular trading on Wednesday, the Nasdaq Composite rallied 2%, the S&P 500 gained 1.05% and the Dow ticked up 0.02%, with ten out of 11 S&P sectors finishing higher.
The US central bank also hinted at future rate hikes, but there are rising indications that this cycle of tightening may be coming to an end.
What emerged as the most important element in the Powell’s speech was when he declared that the deflationary process in the economy had begun. Powell did, however, warn that it would be premature to declare victory over inflation.
The annual inflation had come down from 7.1% in November to 6.5% in December but is still much above the comfort zone of 2%. The next January 2023 CPI data are scheduled to be released on February 14, 2023, at 8:30 A.M. Eastern Time