The rate hike and inflation have been interlinked, which can be known from the Labor Department’s report. Consumer price index rose 0.2% in February after rising 0.5% in January. Core consumer prices, which excludes food and energy prices rose 0.2% in February after increasing 0.3% in January.
In his first public appearances, Powell assured that he would follow the steps of his predecessor Janet Yellen, by increasing the interest rate gradually. In addition, Powell is expected to change the way the bank would announce interest rate hikes from the previous method of quarterly meeting announcements to holding conferences after each of eight FOMC meetings, similar to European Central Bank’s Mario Draghi.
Last week, the market has shown a downward trend, with Dow Jones Industrial Average down 1.6%, S&P 500 declining 1.2% and Nasdaq composite falling 1.4%. However, the market showed upward momentum on Friday.
A week after the implementation of steel and aluminum import tariffs by President Donald Trump, investors are concerned about the potential global trade war. Last week, Trump has fired Rex Tillerson as US Secretary of State and blocked Broadcom’s (AVGO) $117 billion proposed takeover bid of Qualcomm (QCOM) on national security grounds. Also, the President appointed Larry Kudlow as his top economic advisor, replacing Gary Cohn.
Following the inflation report, Fed might raise interest rates three times in 2018, instead of the four as expected by few.
Previously, the market had expected elevated volatility levels due to trade war possibility, interest rate uncertainty and inflation concerns. Following the inflation report, Fed might raise interest rates three times in 2018, instead of the four as expected by few.
It is certain that the markets might speed its way ahead or lag behind would be known only after the interest rate decision is out. Let’s wait for it.