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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/dec/19/markets-federal-reserve-interest-rate-decision-uk-inflation-business-live
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| US stock market hits one-year low after Fed defies Trump with rate hike - business live | US stock market hits one-year low after Fed defies Trump with rate hike - business live |
| (35 minutes later) | |
| Here’s an unwelcome record for Jay Powell - he just triggered the biggest sell-off after a rate hike in almost 25 years. | |
| The S&P 500 closed 1.5% lower on Wednesday in a volatile session that ranked as its biggest one-day drop following a Federal Reserve rate rise since 1994. https://t.co/PCTk1l5n4n pic.twitter.com/Hjra3JcHPA | |
| Capital Economics agrees that the Federal Reserve could have been rather more dovish. | |
| Here’s their take: | |
| The Fed hiked the fed funds target range by 25bp today, to between 2.25% and 2.50%, as most still expected, but tempered the move by slightly revising down Fed officials’ projections for additional rate increases in 2019 and beyond. | |
| Still, with the vote unanimous and the median rate projection for end-2019 revised down by only 20bp, this was hardly the “dovish hike” that some were anticipating. | |
| Key point: Shares aren’t falling because the Fed raised interest rates. That was priced in. | |
| Instead, they’re falling because chair Jerome Powell indicated that they’ll keep hiking if the data justifies it......despite signs of a global slowdown. | |
| #Fed was judged as being "less-dovish-than-expected". Markets were relatively settled until #Powell's press conference. Then the selling set-in. Wall Street off; Dow hits YTD low. Markets believe Fed-hikes will go ahead even as global growth sputters. | |
| It’s early days, but it looks like European stock markets are going to fall tomorrow. | |
| Britain’s FTSE 100 is currently expected to fall around 85 points, according to the futures market at IG, near to a two-year low [reminder, it gained 64 points today] | |
| Looks like Europe going to selloff tomorrow, FTSE futures down big | |
| Newsflash: The US stock market has closed at its lowest level in over a year, following today’s interest rate hike. | Newsflash: The US stock market has closed at its lowest level in over a year, following today’s interest rate hike. |
| The Dow Jones industrial average shed 1.5%, or 351 points, to end at 23,323 points - the lowest point since November 2017. | The Dow Jones industrial average shed 1.5%, or 351 points, to end at 23,323 points - the lowest point since November 2017. |
| That’s a 650-point swing downward since the Fed announced its decision two hour ago. | That’s a 650-point swing downward since the Fed announced its decision two hour ago. |
| The S&P 500 shed 1.4% to 2,510 points, the lowest since late September 2017, while the tech-focused Nasdaq has lost 2%. | The S&P 500 shed 1.4% to 2,510 points, the lowest since late September 2017, while the tech-focused Nasdaq has lost 2%. |
| Clearly Wall Street is disappointed that the Fed expects two more rate hikes next year, on top of today’s rise (which was generally expected). | Clearly Wall Street is disappointed that the Fed expects two more rate hikes next year, on top of today’s rise (which was generally expected). |
| My colleague Dominic Rushe has covered the Fed’s rate hike, and chair Powell’s press conference, here: | My colleague Dominic Rushe has covered the Fed’s rate hike, and chair Powell’s press conference, here: |
| Federal Reserve raises interest rates despite pressure from Trump | Federal Reserve raises interest rates despite pressure from Trump |
| I said earlier that this was a dovish hike. | I said earlier that this was a dovish hike. |
| Actually, it looks more like a dovish-ish one. | Actually, it looks more like a dovish-ish one. |
| Although the Fed has lowered its predicted path of rate increases, it has signalled that it won’t be deterred by a bit of market volatility, and that it expects growth to continue next year. | Although the Fed has lowered its predicted path of rate increases, it has signalled that it won’t be deterred by a bit of market volatility, and that it expects growth to continue next year. |
| As Melanie Baker, senior economist, at Royal London Asset Management, puts it: | As Melanie Baker, senior economist, at Royal London Asset Management, puts it: |
| The Federal Open Market Committee (FOMC), as expected, raised rates 25bps, with their projections implying one fewer rate rise next year. However, the signals sent in the statement and forecasts weren’t as dovish as we had expected, e.g. only making a small adjustment to their language around “further gradual” hikes (by adding the word “some”). A more cautious signal from the Fed could have been justified (and would have been welcomed by equity markets) given the tightening in financial conditions and weaker global growth backdrop. | The Federal Open Market Committee (FOMC), as expected, raised rates 25bps, with their projections implying one fewer rate rise next year. However, the signals sent in the statement and forecasts weren’t as dovish as we had expected, e.g. only making a small adjustment to their language around “further gradual” hikes (by adding the word “some”). A more cautious signal from the Fed could have been justified (and would have been welcomed by equity markets) given the tightening in financial conditions and weaker global growth backdrop. |
| However, the domestic economic data has looked strong enough to suggest that we aren’t at the peak of the rate cycle quite yet. | However, the domestic economic data has looked strong enough to suggest that we aren’t at the peak of the rate cycle quite yet. |
| Bob Baur, chief global economist at Principal Global Investors, thinks the Fed is being too relaxed about recent market volatility: | Bob Baur, chief global economist at Principal Global Investors, thinks the Fed is being too relaxed about recent market volatility: |
| The Fed raised rates as expected, but I think the Fed may be underestimating other factors at play. Trade has been making headlines, but I think a gradual tightening of monetary policy has been the driving force behind recent market volatility. With corporate borrowing and spending still high, and the Fed continuing to reduce its balance sheet, I’d expect volatility to remain if this tightening continues. | The Fed raised rates as expected, but I think the Fed may be underestimating other factors at play. Trade has been making headlines, but I think a gradual tightening of monetary policy has been the driving force behind recent market volatility. With corporate borrowing and spending still high, and the Fed continuing to reduce its balance sheet, I’d expect volatility to remain if this tightening continues. |
| “I still think there is a disconnect between Main Street and Wall Street. A general consensus is that a market downturn signals an upcoming recession, but most underlying data points are still healthy and the economy is robust. Just the other day we saw data signalling strong consumer spending, which is one of a few points that tell me the real economy is doing well. | “I still think there is a disconnect between Main Street and Wall Street. A general consensus is that a market downturn signals an upcoming recession, but most underlying data points are still healthy and the economy is robust. Just the other day we saw data signalling strong consumer spending, which is one of a few points that tell me the real economy is doing well. |
| “I also think the Fed missed the significance around the tightening of financial conditions beyond their activity. The stock market is down, credit spreads are way up, bank stocks are plunging and the dollar is stronger. I think markets would have applauded the Fed signalling a pause next year to see how markets have been adjusting to their previous rate decisions. | “I also think the Fed missed the significance around the tightening of financial conditions beyond their activity. The stock market is down, credit spreads are way up, bank stocks are plunging and the dollar is stronger. I think markets would have applauded the Fed signalling a pause next year to see how markets have been adjusting to their previous rate decisions. |
| Michael McDonough of Bloomberg has pinpointed the moment when US stocks got a chill from Powell.... | Michael McDonough of Bloomberg has pinpointed the moment when US stocks got a chill from Powell.... |
| S&P 500 Intraday & What Powell Said: pic.twitter.com/Zd5fVuwCI8 | S&P 500 Intraday & What Powell Said: pic.twitter.com/Zd5fVuwCI8 |
| Finally, a question on Brexit. | Finally, a question on Brexit. |
| Jerome Powell thinks the US financial system is well-prepared for whatever happens, whether the UK leaves the US with a transition deal, or without one. | Jerome Powell thinks the US financial system is well-prepared for whatever happens, whether the UK leaves the US with a transition deal, or without one. |
| But the Fed will be watching closely, as Brexit is a big issue and something that’s not happened before. | But the Fed will be watching closely, as Brexit is a big issue and something that’s not happened before. |
| That’s the end of the press conference. | That’s the end of the press conference. |
| Jerome Powell reiterates that the Fed expects solid growth in 2019, with declining unemployment. | Jerome Powell reiterates that the Fed expects solid growth in 2019, with declining unemployment. |
| That sounds like conditions that would justify further rate hikes next year, which is why shares are diving in New York. | That sounds like conditions that would justify further rate hikes next year, which is why shares are diving in New York. |
| Equity markets plunge following Fed rate hike:US Indices update:#DOW 23329.38 -1.46%#SPX 2507.43 -1.52%#NDX 6350.61 -2.17%#VIX 25.78 +0.78% | Equity markets plunge following Fed rate hike:US Indices update:#DOW 23329.38 -1.46%#SPX 2507.43 -1.52%#NDX 6350.61 -2.17%#VIX 25.78 +0.78% |