US Federal Reserve Chair Jerome Powell. Source: Reuters.
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  • All eyes were on Wednesday’s notes from the latest US Federal Reserve policy meeting, but the central bank stopped short of confirming anything the market didn’t already know
  • The Central Bank reaffirmed a likely rates hike in March and an end to its bond-buying program in the same month, though this was largely expected among investors
  • Much of what investors have been hoping might have been clarified in the Fed’s policy meeting remains uncertain — including the pace of subsequent rates hikes after March
  • Fed Chair Jerome Powell says with inflation still getting worse, it’s likely the central bank will this year end its significant economic support provided over the COVID-19 pandemic
  • The news sent US markets tumbling back into the red, with the ASX following suit and falling 1.77 per cent to 6838.30 points by the end of the trading day

All eyes were on Wednesday’s notes from the latest US Federal Reserve policy meeting, but the central bank stopped short of confirming anything the market didn’t already know.

The Fed said once more it was likely to hike interest rates in March as it scrambles to curb soaring inflation in the States, though the decision is still not definitive.

Similarly, the bank reaffirmed its plans to end its bond-buying program in March, as was also largely expected among investors.

While the policy meeting notes left the date for a rates hike rather vague, claiming it will “soon” be an appropriate move, Fed Chair Jerome Powell said in a news conference it would likely come before the end of the first quarter of 2022.

“The committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so,” Mr Powell said.

The Federal Reserve notes suggested that while rising vaccination rates and the easing of supply constraints were expected to support gains in economic activity and employment, the US economy was, ultimately, still at the mercy of the coronavirus.

“The path of the economy continues to depend on the course of the virus,” the Fed said.

“Risks to the economic outlook remain, including from new variants of the virus.”

In light of this, the central bank said it would continue to monitor the implications of incoming information for the economic outlook as it assesses its stance on monetary policy.

“The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals,” the bank said.

“The committee’s assessments will take into account a wide range of information, including readings on public health, labour market conditions, inflation pressures and inflation expectations, and financial and international developments.”

Still, much of what investors have been hoping might have been clarified in the Fed’s policy meeting remains uncertain — including the pace of subsequent rates hikes after the March increase.

In any case, Mr Powell said with inflation still getting worse, it’s likely the central bank would pull the rug from under its significant economic support provided over the COVID-19 pandemic.

“This is going to be a year in which we move steadily away from the very highly accommodative monetary policy we put in place to deal with the economic effects of the pandemic,” Mr Powell said.

The Fed’s comments — and, just as importantly, what went unsaid — caused a re-reversal across US markets: the Nasdaq and Dow Jones indices were both clawing back some of the lost ground from the past two weeks until the Fed notes sent them plummeting back into the red in the final hour of trade.

The Dow Jones ended up closing 0.38 per cent lower at 24,168 points, while the Nasdaq just clung to the green and closed 0.02 per cent up at 13,542 points — far below its intraday high of 13,961.

The ASX 200 is followed in the States’ footsteps, down 1.88 per cent to 6838.30 points by the end of the trading day.

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