Stock Futures rose on Wednesday as soon as the market experienced a U-turn in trading. This welcomed the Fed’s decision to increase the speed of its fall, leaving rates of interest unchanged, at least for now.
The 3 major US indices opened much higher compared to the nightlong trading session, mostly driven by the tech stocks soon after the Fed cleared about their timelines for the hikes in the interest rates.
Dow Contracts rose to 35,936 by 10 points while S&P 500 futures approached up by 3 points to 4,712.50. Nasdaq futures edged in green too, up by 7.25 points to 16,295.25.
Federal officials summarised plans to speed up wind-down of the monthly purchases of bonds at a rate twice the previously expected tempo, thereby putting the Feds on the track to discontinue the program entirely by March-end. In an aggressive pivot on how monetary policymakers have planned to treat inflation, the Fed Open Market Committee indicated it was most likely to increase interest rates next years to almost three times in a significant adjustment from the September projections, which suggested an equal split on an increased rate in 2022.
Demand and supply imbalances relating to the lockdown and the economy reopening have led to rising inflation levels, as stated by the FOMC, who also indicated that the Omicron and the other new COVID-19 variants still pose to be a risk to the whole economic outlook.
According to the Chief Economist, Ian Shepherdson, the final outcome of these fresh forecasts states that the Federal has turned into market thinking and the main question right now is to find out when the 1st hike will initiate.
With Omicron out of the scene, it would most likely have happened in March. However, the experience signals an unprecedented and massive surge in the COVID-19 cases in the US with unknown but not permanent consequences. Omicron will most likely delay the hike till May, along with the following movements from September onwards.
The Federal’s “dot plot,” which is a summary of the member’s outlook on the interest rates and economic conditions, projected the FOMC member’s median number expected 3 rate hikes in 2022, four in 2023, and two in 2024. This reflected a faster speed for increases in rates than expected in the September forecast.
According to a senior economist at Wells Fargo, Sarah House, this is an unexpected big move from what the economic projections summarized. However, this shift is not necessarily big compared to what the stock market was pricing in the meeting based on more recent commentaries from recent data and officials.