On Wednesday, US stocks fell sharply after the Federal Reserve announced, as expected, another increase of 75 basis points. The Fed’s decision will raise the benchmark interest rate to a range of 3 percent to 3.25 percent, the highest level since 2008. US stocks traded higher in the early morning, then fell shortly after the Fed’s announcement. Although they rallied a little later, the indicators slid during the last hour of the session. By Wednesday’s close, the Dow was down 522 points, the Standard & Poor’s was down 66 points, and the Nasdaq had lost 205 points. In Canada, the TSX fell by 184 points due to weak energy sector.
North American stock indices struggled on Thursday as concerns about rising rates and a possible recession in the United States weighed on performance. By Thursday’s close, all four major North American indexes posted modest losses, while 10-year US Treasury yields were flat at 3.705 percent, their biggest one-day gain since June.
NA indicators drift down
For the four trading days covered in this report, the Dow Jones lost 745 points to close at 30,077; The S&P 500 fell 115 points to settle at 3758, while the heavy Nasdaq fell 381 points to close at 11067. In Canada, the TSX lost 383 points to end at 19003.
The US Federal Reserve raised interest rates for the third time in a row by 75 basis points
The Federal Reserve announced on Wednesday that it will raise its target interest rate by three-quarters of a percentage point to restore price stability. The decision was widely expected by markets and raised the federal funds rate – a cumulative rate of 300 basis points year-to-date – to 3.25 per cent. Besides the decision regarding policy rates, the Fed also released its Summary Economic Outlook and accompanying charting chart. The FOMC expects policy rates to rise to 4.4 percent – 4.6 percent by the end of this year and next, respectively, before dropping to 3.9 percent in 2024 and settling at a neutral level (a level that is neither accommodative nor restrictive). ) The long-term. The updated forecast is well above the June forecast of 3.4 percent – 3.8 percent for 2022 and 2023 respectively, and 3.4 percent for 2024.
Moreover, the committee expects growth to be less material this year at 0.2 percent (1.7 percent expected in June), 1.2 percent in 2023 (1.7 percent previously), and 1.7 percent in 2024 (1.9 percent). percent previously). Unemployment is also expected to rise to 3.8 percent this year (3.7 percent previously forecast), and 4.4 percent in 2023 and 2024 from its current level of 3.7 percent. With these restrictive policy settings, the Fed expects the rate of personal consumption expenditures – the preferred measure of inflation – to reach 5.4 per cent this year before declining gradually to 2.8 per cent, 2.3 per cent and 2.0 per cent over the three the coming years. Core PCE inflation, which excludes volatile categories such as food and energy, is expected to be 4.5 percent this year and 3.1 percent, 2.3 percent and 2.1 percent over the next three years.
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