While stocks initially dipped following the Fed's post-meeting release, they perked back up after Powell continued to signal flexibility on maintaining its aggressive stance at a press conference that followed. "Since it was government spending that fueled the current inflation cycle, it is paradoxical that this spending can have a direct impact on reducing inflation." Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice. Bonner says a "timely and favorable outcome" in Russia's war on Ukraine will increase global food supply, improve supply chain issues and rein in energy costs, which will benefit American consumers. Interestingly, another unrelated announcement Thursday – the approval of another $1 billion in military aid to Ukraine – could help that particular cause, says Sean Bonner, a 20-year-plus Wall Street veteran and the CEO of self-directed investment app Guild. And remember: The Fed's continued goal is to get that number back down to 2%. The Fed, which predicted a 2.6% rate of inflation (based on the personal consumption expenditures, or PCE, index) back in December now sees a 5.2% rate by year-end 2022. It's largely in the name of tamping down runaway consumer prices. The Federal Reserve's "dot plot" indicates that Federal Open Market Committee members see the benchmark rate hitting 3.4% by year's end, and 3.8% by the end of 2023 – with the possibility of rate cuts in 2024. But with inflation not letting up, it's become pretty clear that the Fed needs to take a more aggressive approach," says Mike Loewengart, managing director of investment strategy for E*Trade, who adds that retail investors should expect continued volatility as the market digests the new norm. "Even two weeks ago, we might have thought that a 0.75% increase was off the table, at least in the short term. SEE MORE 25 Best S&P 500 Stocks of the Pandemic Bull Market Stocks ultimately finished higher, with a little help from Fed Chair Jerome Powell. But on Wednesday, it instead met recently stepped-up expectations spurred by still-sizzling inflation prints, announcing a 75-basis-point hike to a range of 1.5% to 1.75% – the largest such bump since 1994. The Federal Reserve isn't messing around.įor months, America's central bank largely telegraphed a 50-basis-point increase to its benchmark interest rate for its June policy meeting. The Fed announced June 15 that it would raise its benchmark interest rate by 75 bps. Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on Jan.
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