Wednesday proved to be a rough day for Wall Street. The US Federal Reserve’s announcement that half a percentage point would increase interest rates before the end of next year. As a result, stocks were down for the most part and the dollar remained volatile; Treasury yields, on the other hand, remained flat.
According to Fed chairperson Jerome Powell, the inflation the regulator received in October and November showed that inflation slowed down a little over a two-month period. However, he added that it would take more evidence to prove that inflation is finally on a steady downtrend.
Currently, the US is on the brink of recession, given the current increase in the unemployed and incredibly slow economic growth.
Meanwhile, the US consumer price index (CPI) was up by 0.1% in November, around 0.2 percentage points than expected. Experts also noted that headline CPI was at its slowest pace in nearly a year, climbing to 7.1% in the twelve months through November 2022.
US import prices were also down for the fifth straight month as November drew close, while the Dow Jones Industrial Average was down by around 0.4%.
Elsewhere, the tech-centric Nasdaq Composite fell by around 0.76%, while the Morgan Stanley Capital International (MSCI) All-World stock index dropped by 0.2%.
Likewise, US Treasury yields remained static for much of the day, but dropped slightly lower following the Fed announcement, while the yield on benchmark ten-year Treasury yields were up by two basis points, a slight recovery from its eleven basis point fall on December 13th.
How the Fed Announcement Affected the Dollar’s Performance
While the US dollar seemed to rally following the Fed’s latest announcement, trading was shaky for the most part and the currency was down by 0.5% at the end of the day.
Likewise, the euro went up by 0.44% to $1.0677, while the Japanese yen was up by 0.19% against the dollar. Pounds sterling, on the other hand, were up by 0.57%, trading at $1.2425 during the day.
The News from Elsewhere
Meanwhile, European stocks stayed flat as the STOXX 600 was down by 0.02%,
In Asia, on the other hand, MSCI’s Asia-Pacific shares index outside Japan was up by approximately 1%, possibly bolstered by the easing of COVID-19 restrictions in China.