Fed decision in March 2023

The Fed has hinted in its forecast that there will be only one more rate hike this year.

“The committee will closely monitor incoming information and assess its impact on monetary policy,” the FOMC said in a post-meeting statement.

The central bank raised interest rates by a quarter of a percentage point on Wednesday, raising the target range from 4.75% to 5%.

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–Darla Mercado, Jeff Cox

Here’s where the market stands before the Federal Reserve interest rate decision:

The Dow Jones Industrial Average fell 0.2% around 1:46 pm ET, while the S&P 500 fell 0.1%. Nasdaq Composite was slightly positive, up 0.1%.

Government bond yields fell ahead of the central bank’s decision, with 2-year yields down 3 basis points to 4.14%. Yields on 10-year bonds fell about 5 basis points to 3.547%.

Crude oil prices rose. West Texas Intermediate futures and Brent rose about 1%.

–Darla Market

The Fed’s decision will reach a tense moment for markets as central banks juggle efforts to tame inflation while stabilizing the struggling banking sector.

The market expects the Federal Open Market Committee to raise interest rates by 0.25 percentage points on Wednesday afternoon. This brings the benchmark fund rate between 4.75% and 5%, the highest level since 2007.

Policy makers also release forecasts for the economy and terminal rates. FOMC members develop individual forecasts of interest rates known as dot plots.

This rate-setting wildcard is the recent predicament in the global banking sector. The question is whether the Fed will go ahead with rate hikes in the wake of recent bank failures. Citi economist Andrew Hollenhorst said there have been instances in the past when central banks have paused or reduced rate hikes and then resumed them.

Please check this out for details.

–Darla Mercado, Jeff Cox

Economists say Federal Reserve Chairman Jerome Powell will have the difficult task of balancing the continued need to keep inflation under control this afternoon with growing concerns about bank instability. said he would.

“The Fed still has work to do, and given the events of the past few days, their actions and communications will come under increased scrutiny,” said Andrew Patterson, senior economist at Vanguard. We need to be careful to balance price and financial stability risks.”

The firm’s global chief economist, Joseph Davis, said central banks had to walk “a delicate line”.

Economists say whatever decision the Fed makes will bring criticism.

abrdn senior economist Luke Bartholomew said he agreed with the consensus forecast that the central bank would approve a quarter percentage point hike. But the decision marks a change from before the banking crisis, when a 0.5 percentage point rate hike was considered more likely, he said.

“The Fed faces some very tough decisions this week,” Bartholomew said. But the crisis in the rolling bank sector now means many investors are counting on the Fed to avoid further stressing the market. So we’re putting policy on hold this week,” he said.

— Alex Haring