The US Federal Reserve kicked off its 2nd day of interest rate deliberations on November 1 and the apex bank decided to maintain the key overnight interest rates unchanged at 5.25%-5.50%. Jerome Powell-led FOMC kept interest rates unchanged. With this, the current levels exhibit that rates are at 22-year high, even as the US economy maintains its momentum despite increased interest rates, with inflation remaining above the US Fed’s 2% target range. Several traders were waiting for the decision as they wanted to have a look at the key highlights of the US Federal Reserve meeting.
The FOMC echoed that since job gains are still strong and inflation remains higher, it continues to consider “the extent of additional firming of policy over an extended period of time.” Gross domestic product (GDP) of the United States saw an expansion at an annualized rate of 4.9%in 3Q, as per the report released by US Bureau of Economic Analysis (BEA).
At the time of studying the key highlights of the US Federal Reserve meeting, traders and investors took the recent decision of the US Fed positively as they believed that Federal Reserve’s tightening is now over. This provided some sigh of relief to the market, with NASDAQ Composite Index rising by ~1.64% and NASDAQ-100 by ~1.77%. With this, experts opine that central bank of the US might stay put for remainder of 2023. Increasing the interest rates is one mechanism which global central banks use to keep a check on inflation.
While analysts wait for the key highlights of the US Federal Reserve meeting, this move of the apex bank was widely anticipated. Central bank mentioned that “economic activity saw expansion at a strong pace in 3Q.” Earlier, FOMC stated that the US economy continues to grow at a “solid pace.” Given recent surge in yields, the US Fed is less likely to increase interest rates at their December meeting, with the probability of increasing them later to keep a check on inflation.
If we talk about some other data points, ISM manufacturing index exhibited that manufacturing activity saw a contraction in October. The US treasury is all set to auction ~$112 billion in debt in upcoming week, in line with Wall Street expectations. In October, the 10-year U.S. Treasury yield touched a 16-year high because investors were worried that the apex bank might keep interest rates higher for longer period of time.
US Federal Reserve saw criticism, with some expecting that holding interest rates at higher levels might put the US economy at the risk. But the US economy grew by ~4.9% from July to September.
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