FOMC Hikes Rates 25 bps As Expected, Leaves Open Further Hike Expectations

FOMC, Dollar, S&P 500, ECB and BOE Rate Decision Talking Points:

• The Federal Reserve hiked its benchmark rate 25bps to a range of 4.50 – 4.75 percent
• The US benchmark is higher than its principal global counterparts, but that advantage has been previously priced in
• In the policy statement that accompanied the decision, the group said ‘anticipates that ongoing increases…will be appropriate’

The Federal Open Market Committee (FOMC) announced a 25 basis point increase in its benchmark rate range to 4.50 – 4.75 percent. The increase was a further step down in pace from the 50 bp increase in December and the 75 bp hike in November – following a stretch of four consecutive such heavy hikes. The increase in the benchmark rate was in-line with the consensus forecast from economists and the market itself via Fed Fund futures, so it was perhaps not a surprise that the initial market response centered on volatility without a clear view on direction.

With the market’s looking for clues to the Federal Reserve’s ultimate top for its benchmark lending rate, the monetary policy report offered some conflicting signals. On the one hand, the group mentioned that inflation had ‘eased somewhat but remains elevated’ – removing the references to volatile energy and food components. The maintenance of the remark that the group “anticipates that ongoing increases in the target range will be appropriate in order to…return inflation to 2 percent” is an unexpected hawkish perspective.

FOMC Scenario Table

Table Made by John Kicklighter

Chart of S&P 500 Emini Futures with Volume (5-Minute)

Chart Created on Tradingview Platform

Chart of the DXY Dollar Index (5-Minute)

Chart Created on Tradingview Platform

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Table of Relative Monetary Policy Standing

Table Made by John Kicklighter

Table of Relative Monetary Policy Standing

Table Made by John Kicklighter