fbpx

Fed Keeps Rates on Hold but Warns of More to Come

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

The Federal Reserve held interest rates as expected on Wednesday but warned that sticky inflation was likely to attract at least one more interest rate hike of 25 basis point this year. The Fed also announced fewer rate cuts next year as recent economic strength calls for a tighter path of monetary policy.

The Fed kept its benchmark interest rate in a range of 5.25% to 5.5% as recent evidence that its aggressive rate-hikes delivered over the past year are clearly starting to tame inflation. Despite consistent moderation in inflation, another rate hike remains on the table and the Fed maintained its forecast for rates to peak at 5.5% to 5.75% this year.

Additionally, the Federal Reserve adopted a more hawkish stance, predicting that monetary policy will remain tighter through 2024 than previously anticipated. The U.S. central bank updated its quarterly projections showing interest rates would fall only 50 basis points in 2024 compared to the 100 basis points of cuts outlined at their June meeting.

The surprising strength of the economy has attracted the Fed’s attention forcing it to upgrade the economic outlook ahead. Economic growth this year was revised substantially higher to 2.1% from the 1% rate projected at the June meeting. For 2024 the growth forecast was also raised higher to 1.5% from 1.1% previously.

But with inflation still running above the Fed’s 2% target, and ongoing strength in the economy that threatens to reignite inflation, committee members endorsed recent positive inflation data, but are not ready to declare victory on inflation yet. For 2025, the Fed expects interest rates to drop to 3.9%, well above the 3.4% previously projected, and fall further to 2.9% in 2026.

The tight labour market, which has been one of the main culprits for sticky inflation as wage growth underpins the bulk of price pressures in the service sector, continues to worry the Fed. Fed members now appear less confident that the tight labour will ease sooner than rather later.

The unemployment rate is expected to be 3.8% in 2023, down from a prior estimate of 4.1%, but rise to 4.1% next year and remain at that rate for 2025, down from the June forecast of 4.5%, according to the Fed’s projections. For 2026, the unemployment rate is expected to fall to 4.0%.

A graph of stock market

Description automatically generated

Source: TradingView

Technology stocks were the hardest hit among its peers on Wednesday, with the current price action approaching its key support of 14,557. The lower high on the daily chart shows that the rally is running out of steam as the bulls are losing conviction. The Relative Strength Index (RSI) broke its bull market range support recently, showing that momentum conditions are deteriorating.

The RSI is a leading indicator and usually reverses before the price itself. Therefore, if profit taking extends in the coming week and the index breaks below its key support, lower price levels are likely to unfold in the coming month(s). The potential downside price target based on such a breakout is in the range between 13,500 and 13,700.

Despite the lack of a reversal signal on the chart at this juncture in time, collectively the current ominous technical set up and the recent deterioration in momentum conditions, do not bode well for the near-term outlook for the market.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Related Posts

Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Violeta-540x540-1.jpg
Violeta Todorova
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Gold is in a healthy correction and higher price levels are likely by year end.
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Violeta-540x540-1.jpg
Boyan Girginov
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Supply, demand disequilibrium and lower US rates could squeeze the non-precious metal
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Violeta-540x540-1.jpg
Sandeep Rao
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Q2 is poised for European stocks’ turnaround and rising interest in energy stocks
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Violeta-540x540-1.jpg
Violeta Todorova
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
Escalation of the conflict in the Middle East threatens to derail the economic recovery.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Boyan Girginov
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
What is an ETF? How does an ETF work? Key characteristics of ETFs.
Violeta-540x540-1.jpg
Pawel Uchman
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
Violeta-540x540-1.jpg
Sandeep Rao
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.
A quick primer on leveraged instruments available in markets today.

Violeta Todorova

Senior Research

Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.

Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.

Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.

Julian Manoilov

Marketing Lead

Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.

Oktay Kavrak

Head of Communications and Strategy

Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.

È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.

Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.

Sandeep Rao

Research
Sandeep è entrato a far parte di Leverage Shares nel settembre 2020. È responsabile della ricerca sulle linee di prodotto esistenti e nuove, su asset class e strategie, con particolare riguardo all’analisi degli eventi attuali ed i loro sviluppi. Sandeep ha una lunga esperienza nei mercati finanziari. Iniziata in un hedge fund di Chicago come ingegnere finanziario, la sua carriera è proseguita in numerose società ed organizzazioni, nel corso di 8 anni – da Barclays (Capital’s Prime Services Division) al più recente Index Research Team di Nasdaq. Sandeep detiene un M.S. in Finanza ed un MBA all’Illinois Institute of Technology di Chicago.

Gold Retreats But Rally is Not Over

Copper Ready to Explode

Q2 2024 Market Outlook: Rocky Road Ahead

What is an ETF? (Exchange Traded Fund)

How Do Leverage Shares ETPs Trade in Multiple Currencies

Currency Impact