FPG Overnight Headlines 15/12/2022

Overnight headlines 

The Dow lost more than 600 points from just before the Fed announced its statement and projections until long after Fed chairman Jerome Powell started meeting with reporters, resulting in a final loss of 142 points. 

Powell claimed that the government’s aggressive campaign of interest rate rises was still ongoing. “There is still a long way to go. Maintaining a tight posture on policy for a while will probably be necessary to restore price stability, he told reporters. 

Just before the Fed delivered its rate statement and updated economic predictions, all US benchmarks were up by around 0.8%. Over the last two hours of trading, they fluctuated widely. 

Rates are expected to close the year at 5.1%, shattering expectations that the Fed will switch to a rate drop in the second half of 2023. Rates are anticipated to be 4.1% by the end of 2024. 

A sustained increase 

Seven authorities anticipate a rate peak that is considerably higher, with one official predicting that the rate will need to increase to 5.75 percent and remain there through at least 2025. 

It’s unclear if Fed officials genuinely trust their own forecasts or whether they’re consciously attempting to undo some of the financial conditions’ recent relaxation. 

Whether the Fed raises rates by another 0.5% when it meets in early February or switches to a 0.25 percent rate is a topic of disagreement among market experts. 

Prior to the announcement, investors predicted that rates would increase to around 4.8% in May, then decrease by a total of 0.5% in the second half of the year, reflecting the belief that the Fed would be compelled to act due to a weakening economy and declining inflation. 

Ahead: BoE and ECB 

The Fed’s statement today indicates that they will be even more restrictive than they had previously indicated, according to Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, despite a lower-than-expected CPI inflation report from yesterday. 

The local currency increased by 0.1% while the Bloomberg dollar spot index decreased by 0.3%. 

Bitcom increased by 0.2% to $US17,800 on bitstamp.com after briefly crossing the $US18,000 mark. 

The US 10-year note’s yield decreased by 2 basis points to 3.48 percent. 

Later on Thursday, both the Bank of England and the European Central Bank are scheduled to convene policy meetings. 

Market movements 

• AUD up 0.1% to US cents 68.61 
• Bitcoin up 0.7% to $17,840 USD 
• The Dow fell 0.4% on Wall Street. S&P -0.6% -0.8% Nasdaq 
• The Stoxx 50 in Europe fell 0.3%. FTSE -0.1% and CAC -0.2% DAX -0.3% 
• Spot gold fell by 0.2% to $1806.76 USD/oz. 
• Brent crude increased 2.6% to US$82.75 per barrel. 
• Iron ore fell by 0.5% to US$109.75 a tonne. 
• US 3.48% for the 10-year yield. Germany 1.93% Australia 3.36 percent 

Today’s agenda 

Local: December MI consumer inflation expectations, November MI labour force 

Overseas data: Third-quarter GDP for New Zealand; November retail sales and industrial production figures for China; Friday’s Bank of England and European Central Bank policy decisions; US retail sales and industrial production for November