Today’s News

Federal Reserve Chair Jerome Powell made it clear yesterday that the central bank is close to done in terms of raising interest rates, but his colleagues delivered the message indicating that borrowing costs must remain higher for longer amid renewed strength in the economy to maintain its stability.

After a series of rapid rate hikes over the past 18 months, the Federal Reserve can now “proceed carefully,” Powell said in a sentiment he repeated at least a dozen times to stress its importance yesterday during a press conference that followed the central bank’s decision to leave rates unchanged.

Based on the quarterly economic projections released following a two-day policy meeting, 12 of 19 Fed officials said they still expect to raise rates once more this year. The bigger takeaway for investors was the revelation that policymakers see fewer rate cuts than previously anticipated in 2024 due to a stronger labor market.

The projections also indicated expected inflation to fall below 3% by next year and make a much-anticipated return to the 2% target by 2026. In other words, the “soft landing” for the U.S. economy that looked more remote three months ago now has finally seem within reach.

Other related news include:

Fed Rates Remain Unchanged But Signals Another Hike

The Fed left its benchmark interest rate unchanged while signaling borrowing costs will likely stay higher for longer after one more hike for the year to maintain stability of its renewed strength in the economy.

The U.S. central bank’s policy-setting Federal Open Market Committee, in a post-meeting statement said officials will determine the extent of additional policy firming as it may be appropriate for one last hike. The FOMC held its target range for the federal funds rate at 5.25% to 5.5%.

Expectations Soar As Potential Hike In Yields Inbound

Bond traders are bracing for Treasury yields to continuously push higher after the Fed signaled that it’s likely to hold interest rates at lofty levels well into the following year.

58% of the 172 respondents in a survey prior to the Fed’s decision said that 2-year Treasury yields have yet to peak, while a plurality expect 10-year yields to spill over 4.5% at least. Two-year rates rose above 5.19% today to a fresh 17-year high, while 30-year yields climbed to an astounding 4.48%, a level that was last seen in 2011.

Asia Stocks Retreat As Dollar Strengthens

Stocks in Asia fell and the dollar strengthened today after the Fed signaled interest rates will be higher for longer.

Equity benchmarks in Japan, Australia and Hong Kong declined, while mainland China shares whipsawed in an opening trade. Property developers in China rose in a sign new measure to ease homebuying rules had improved the outlook for the hard-hit sector.