Fed Decides to Speed Up Taper, Expects Three Rate Hikes in 2022
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Key Takeaways
- The Federal Reserve announced Wednesday it will leave rates unchanged at ultra-low levels
- Stocks shifted gears after Chair Powellâs conference as traders welcomed the news
Whatâs on Focus in the Markets?
The defining moment of the week, the Fedâs final press conference of 2021, finished with increased hopes for more gains ahead. Federal Reserve Chairman Jerome Powell delivered remarks largely in line with Wall Street expectations.
More specifically, the US central bank pledged to maintain current interest rates near zero. In addition, the Fed removed the word âtransitoryâ to describe inflation. Also, Chair Powell announced policymakers at the Fed will double the rate of taper to $30 billion a month.
And finally, the Federal Reserve plans to hike interest rates three times next year.
The largely positive announcements made by Chairman Powell were quickly scanned by market participants. The low-interest rates, for example, helped boost stocks and even cryptocurrencies as investors became optimistic there is more room for growth.
Where Are Stocks Headed?
As a result, stocks across the board flipped into the green after hovering in the red during the early hours. On that front, the Nasdaq Composite was the biggest winner on Wednesday. The tech-heavy index advanced 2.1% led higher by big tech names. More precisely, Amazon, Facebook, and Apple gained 2% or more each.
Further, the Dow Jones and the S&P500 added 1%, and 1.6%, respectively as investors piled into shares across the board.
The much-awaited Fed decision helped lift investor concerns in regards to inflation and overall uncertainty about where the bank may choose to go. With this in mind, the Fedâs next moves were greeted not only by traditional investors but also cryptocurrency traders.
Whatâs the Latest News on Bitcoin?
The price of bitcoin advanced over 5%, while Ether rallied more than 12% from its lows on Wednesday. In particular, bitcoin, the worldâs biggest cryptocurrency, gained about $3,000 to reach levels near $50,000. The Ethereum coin, on the other hand, added almost $400 to climb above $4,000.
The upside move was powered by increased buying after Fed Chair Powell gave his positive remarks. In other words, crypto traders saw opportunities for more growth and green arrows given the easy-money policies will stay around.
Low-interest rates, for example, have fueled the money supply, a large part of which has ended in stocks and cryptos. Further, accommodative policies from the Fed have propelled equity indexes and cryptocurrency markets to record highs.
Whatâs Next for Traders and Investors?
Looking ahead into the rest of the week, a flurry of economic data arrives Thursday. Some major news investors will follow in todayâs session include the European Central Bank decision followed by a press conference.
Also, the US will reveal initial jobless claims for the past week. Additionally, the Bank of England will publish its interest rate decision and meeting minutes.
Keep in mind that todayâs events are likely to increase the volatility in financial markets. In turn, this could present opportunities for traders to enter the market.
Todayâs Economic Calendar (EST times)
- 07:00 am, GBP, BoE Interest Rate Decision (Dec)
- 07:00 am, GBP, BoE, MPC Meeting Minutes
- 07:45 am, EUR, ECB Monetary Policy Statement
- 07:45 am, EUR, ECB Interest Rate Decision (Dec)
- 08:30 am, USD, Initial Jobless Claims
- 08:30 am, EUR, ECB Press Conference
- 09:30 pm, JPY, BoJ Monetary Policy Statement
- 09:30 pm, JPY, BoJ Press Conference
Check our calendar right here.
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