Fed, US rates at 5%: here are the effects of the new hike on bonds, shares and currencies

Powell’s ninth rate hike

Since March 16, 2022, the Fed has raised rates eight times. In four consecutive cases the increase was 0.75%, while on 22 March, as was widely assumed by the market given the climate of uncertainty caused by the banking crisis triggered by the failure of the Silicon Valley Bank, the increase stopped at 0.25 %. This is the ninth rate hike decided by the Fed led by Jerome Powell in just 12 months. With this increase, which brings the cost of money in the States to a value between 4.75% and 5%, rates have reached their highest point since 2007, in the presence of an inflation rate which decreased to 6%, from 6.4% the previous month. Concern about a level of inflation that is still very far from that level declared as optimal of 2% has therefore prevailed in the Fed’s choices, and concerns related to the stability of the financial system have faded into the background, which will in any case be pursued by all means provision of the Federal Reserve. At this point, analysts expect the end of the bullish cycle to be near, with a peak of 5.1% to be reached at the end of the year. For the end of December 2024, a rate level of 4.3% is expected (a little more than the 4.1% estimated in December), and a decline to 3.1% in 2025. Inflation should drop to 3.3% this year and 2.5% in 2025.

Mar 23, 2023

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