Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on February 01, 2023 in Washington, DC.
Kevin Dietsch | Getty Images News | Getty Images
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Federal Reserve officials show no sign of pivoting away from rate hikes.
What it’s essential to know today
- Minutes from the Federal Open Market Committee’s February meeting revealed that members imagine “ongoing” rate of interest increases are vital. While most approved a quarter-point hike, a “few” wanted to extend rates by 50 basis points.
- U.S. stocks ended Wednesday lower, though the Nasdaq Composite eked out a 0.13% increase. Asia-Pacific markets were mixed on Thursday. South Korea’s Kospi rose 1% because the country’s central bank held rates of interest regular.
- Tesla CEO Elon Musk met California Governor Gavin Newsom at the corporate’s latest engineering headquarters in California. Musk has been critical of the state’s policies — but California is the country’s biggest marketplace for electric vehicles.
- Nvidia beat earnings and revenue expectations. For the present quarter, the chipmaker forecast higher sales than Wall Street expected, because of the synthetic intelligence boom. The corporate’s shares popped 8.5% after hours.
- PRO Coinbase’s fourth-quarter results beat Wall Street’s estimates, and its shares are up 72% this 12 months alone. But short seller Jim Chanos says he’s still betting against the crypto exchange.
The underside line
The Federal Reserve’s minutes didn’t tell us anything we didn’t already know. To summarize: Price increases are slowing, but inflation continues to be worryingly above 2%. Hence, rates of interest have to proceed rising. February’s quarter-point hike received unanimous support, but a number of members wanted rates to extend at a more aggressive pace.
Despite the fact that investors have heard those warnings before, markets fell. The Dow Jones Industrial Average lost 0.26% and the S&P 500 dropped 0.16% — however the Nasdaq rose 0.13%, buoyed by a 12.5% jump in Palo Alto Networks. Still, the larger sell-off in markets suggests that investors hoping for a dovish tone within the minutes were upset.
Furthermore, there are warning signs that the Fed is growing increasingly aggressive in its fight against inflation. It’s true that there was “no effort within the minutes to flag the potential of stepping back as much as a 50bp pace of hikes,” within the words of Krishna Guha, head of worldwide policy and central bank strategy at Evercore ISI. But recall that the meeting was held before the Fed had details about January’s out-of-this-world labor picture, the higher-than-expected consumer price index reading and rebounding retail sales.
It may be more prudent, then, to take heed to brisker comments by Fed officials, akin to Loretta Mester and James Bullard, who each advocate for a 50-basis points hike. Bullard even thinks the U.S. economy can remain aloft despite the turbulence brought on by higher rates of interest. Despite Fed hawkishness, signs point to a no-landing scenario, which should give investors some comfort.
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