Dollar (USD) falls to one-week low as Powell pushes back against 75 bp hike
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Fed hikes by a half-point
A historic Fed decision is in the books and Fed Chair Powell did not disappoint. The Fed delivered the first-rate hike in 22 years and signaled more rate increases are appropriate and that the balance sheet runoff will begin in June. Growth is cooling and that could get a lot worse as the Ukraine invasion will continue to drive upward pressure on prices. Wall Street still believes the Fed will be able to deliver a soft landing and that is good news for equities. The key takeaway from the Fed is that they are not ready to consider larger rate hikes. Risky assets got a boost after Fed Chair Powell said, ““So a 75 basis point increase is not something that the committee is actively considering.”
Inflation is not slowing down anytime soon, but that is not scaring Powell as his confidence grows that he can remove the option of Volcker-type rate hikes.
US stocks surged after Fed Chair Powell signaled he can slow inflation without triggering a recession. It seems risky assets can rally now that Wall Street has fully priced in the rest of the year’s rate hikes by the Fed.
Cryptos
ApeCoin, the token used for the Bored Ape Yacht Club network, surged after Elon Musk changed his Twitter profile picture to an image showing several avatars. The crypto market continues to react to anything that Elon Musk does, but the lack of a Bored Ape endorsement and a tweet that said “seems kinda fungible” made ApeCoin give back most of its gains.
Bitcoin rallied after Fed Chair Powell ruled out larger interest rate hikes.
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