For the first time since the outbreak, the Federal Reserve is expected to raise its target fed funds rates on Wednesday. As the Russia-Ukraine conflict continues in Europe, analysts and economists are hyper-focused on this key event. Investors wonder how stock markets, cryptocurrency prices, and investments like precious metals will react if the Federal Reserve decides to raise the rates by a quarter percentage point from zero.
Anxiety Reigns Over the Fed’s Next Moves — A 25 Basis Point Increase Is Expected
The world watched last week as financial sanctions were imposed against Russia, and gold prices soared to an all-time high of $2,060 per ounce. Energy stocks, oil, and a slew of other commodities have all seen significant gains in the last seven days. After a brief price jump on March 9, 2022, cryptocurrency markets were lackluster last week, volume was down, and action remained flat.
Stocks, on the other hand, took a beating, with major indexes such as the NYSE, Dow Jones, S&P 500, and Nasdaq all closing in the red on Friday afternoon (EST). To make matters worse, the Consumer Price Index (CPI) report from the US Labor Department shows that consumer prices hit a 40-year high of 7.9% in February.
On Wednesday, a key event for all of the aforementioned markets will take place. For the first time since the Covid-19 pandemic, the US Federal Reserve is expected to raise the benchmark bank rate at that time. The hike is expected to be a quarter-point increase, but investors will be watching to see if the Fed announces a series of rate hikes for the rest of the year.
Ted Oakley, the managing partner of Oxbow Advisors, predicted a 25 basis point increase this Wednesday during a panel discussion on March 11.
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“I’d like to consider what might happen with the Fed.” “Obviously, we’re anticipating a 25 basis point increase next week,” Oakley said. “There was a lot of concern that the markets didn’t seem to be all that sure about what the Fed would do next.” What are your options for dealing with this? When you don’t know how aggressive the Fed will be, how do you position your portfolio?”
Futures markets predict an ‘aggressive’ series of rate hikes, according to a report from the Fed Watch Tool
The Fed Watch Tool at CME also predicts a 0.25-percentage-point rate hike by the US central bank. According to a Bloomberg report published on Sunday, the Fed may become more “aggressive” after the first rate hike.
According to Bloomberg’s Craig Torres and Olivia Rockeman, “futures markets show around 165 basis points of tightening this year, or the equivalent of at least six quarter-point increases.” Moody’s Analytics chief economist Mark Zandi said it’s a good idea to move forward with rate normalization at a House Financial Services Committee meeting on Tuesday. Zandi stated at the meeting:
Normalizing interest rates, in my opinion, is critical to ensuring that the economy continues to grow and avoid recession
The crypto markets are still dull, gold is down 3.49 percent, and monetary easing is coming to an end.
The price of one ounce of gold is lower on Sunday afternoon than it was last week when it reached a high of $2,060. Gold is currently selling for $1,980 per ounce. 999 fine gold. The global crypto market capitalization is hovering around $1.78 trillion at the time of writing, down 2.6 percent in the last 24 hours.
Only a few tokens saw single-digit gains on Sunday, indicating that crypto markets are still dull. Supporters of digital currencies will be watching the Fed’s decision on Wednesday to see if it has a negative impact on crypto markets. According to most reports, the central bank is unlikely to hold off on raising its target federal funds rate this month.
Most analysts and economists agree that Fed chair Jerome Powell’s and the US central bank’s monetary easing tactics are coming to an end, just as the futures markets and CME’s Fed Watch Tool predict.
Derek Tang, an economist at Monetary Policy Analytics in Washington, said on Sunday that “[Jerome] Powell can’t really afford to be dovish at this point; it would be inconsistent with what sound policy is and where policy needs to go.”
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