Fed July meeting HIGHLIGHTS: Jerome Powell-led FOMC decides to hike key rates by 25 bps as widely expected

Thank you! That's all on Zeebiz.com's blog on the July 2023 Fed policy review

For all other news related to business, politics, tech, sports and auto, follow us on TwitterFacebook, LinkedIn and Instagram. 

Inflation has fallen from last year's highs without serious damage to US economy: Jerome Powell 

As the Fed enters a tricky period in its inflation fight, balancing the need for further rate increases against the risks of going too far, the Fed Chair says finishing the task on inflation will likely require some economic losses. He says a rate hike is possible at the September review.

"My base case is that we will be able to achieve inflation moving back down to our target without a really significant downturn that results in high levels of job losses," he says. "But it's a long way to be sure and we have a lot left ... Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions."

Fed rate hike as widely expected, economic lags of massive hikes will not necessarily require further Fed hikes beyond July: Emkay Global's Madhavi Arora

Madhavi Arora of Emkay Global points out that the only notable change to the post-meeting statement was an upgrade of the description of economic growth to “moderate”, from “modest” in June, and still added a bias toward “additional policy firming”. "While the statement had a hawkish bias, Chair Powell’s post-meeting presser tilted a little toward the dovish side. While noting the FOMC is not committed to further action, he stated he saw encouraging signs on labor markets and inflation. We maintain that the economic lags of massive hikes will not necessarily require further Fed hikes beyond July," Arora says. 

"We respect the price action, but it remains the case that the rest of the global picture falls short of the conditions more historically associated with sustained dollar weakness... We do not fall in the dollar weakness camp. For us, the core of the dollar-bullish-to-neutral view has been global in nature, following China’s downdraft and the subsequent weakness in Europe in Q2," she adds.   

Fed staff drop US recession forecast, says Chairman Jerome Powell 

Fed Chair Jerome Powell says the central bank's staff no longer forecasts a US recession. "We do have a shot" for inflation to return to target without high levels of job losses, he says.

Powell told a news conference after the Fed's latest interest-rate hike that there was "a lot left to go to" see such a soft landing. "So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession."

FOMC describes US economy as growing at a "moderate" pace

That is still a slight upgrade from the "modest" pace seen as of the June meeting.

Fed Rate Hike | US central bank says inflation remains elevated

"The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy," the Fed says in language that is little changed from its June statement. This leaves the US central bank's policy options open as it searches for a stopping point to the current tightening cycle.

Though inflation data since the Fed's meeting in June has been weaker than expected, policymakers have been reluctant to alter their hawkish stance until there is more progress in reducing price pressures. Key measures of inflation remain more than double the central bank's target, and the economy by many measures, including a low 3.6 per cent unemployment rate, continues to outperform expectations given the rapid increase in interest rates.

Image: Reuters

Fed Hikes Rates | US central bank leaves door open to another hike

The Fed cites still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years. The latest rate hike, the Fed's 11th in its last 12 meetings, sets the benchmark overnight interest rate in the 5.25-5.50 per cent range, and the accompanying policy statement leaves the door open to another increase.

As it stated in June, the Fed says it will watch incoming data and study the impact of its rate hikes on the economy "in determining the extent of additional policy firming that may be appropriate" to reach its two per cent inflation target.

Read more on Fed rate decision

Fed Rate Hike | No Surprise | US stock market largely unchanged after Fed decision 

Here's where the three Wall Street benchmarks stand minutes into the release of the Fed rate decision: 

• Dow Jones Industrial Average: up 22.8 pts at 35,460.8
• S&P 500: down 9.5 pts or 0.2 per cent at 4,558
• Nasdaq Composite: down 52.2 pts or 0.4 per cent at 14,092.4

Federal Open Market Committee statement: https://t.co/AtyYGAmTFY

— Federal Reserve (@federalreserve) July 26, 2023

BREAKING | US benchmark rates hiked to 5.25-5.5%

BREAKING | FOMC decides unanimously to hike rates

BREAKING | Fed rate Decision | US central bank decides to hike key rates by 25 bps  

Fed Rate Decision Today | S&P 500, Nasdaq slide amid Big Tech results; Microsoft shares fall 4%

The S&P 500 and the Nasdaq Composite edge lower as investors assess mixed earnings from Microsoft and Alphabet ahead of a Fed rate hike that could push borrowing costs to their highest since the global financial crisis.

Microsoft shares fall four per cent after the company lays out an aggressive spending plan to meet demand for its new artificial intelligence (AI)-powered services. The Windows maker still surpassed estimates for quarterly revenue and profit. Here's where the three main US stock market benchmarks stand three-and-a-half hours into the opening bell:

• Dow Jones: up 7.4 pts at 35,445.5
• S&P 500: down 12.6 pts or 0.3 per cent at 4,554.8
• Nasdaq Composite: down 74.5 pts or 0.5 per cent at 14,070 

Here's a summary of Fed rate decisions in the current cycle of monetary policy tightening

Sensex rose 351 pts to end at 66,707, Nifty at 19,778 amid broad-based gains 

Earlier in the day, Indian equity benchmarks settled half a per cent higher backed by broad-based gains. The Sensex rose 351.5 points to end at 66,707.2 and the Nifty added 97.7 points to settle at 19,778.3, with oil & gas, FMCG and IT shares being at the forefront of the upmove. 

Here's how the indices moved through the day: 

Nifty 

Sensex 

Images: BSE, NSE

Read more on the July 26 session on D-Street

European shares fall after six-day winning run; LVMH tumbles 

European equities are set to snap a six-day winning run, hurt by underwhelming results from French luxury goods giant LVMH as well as nerves ahead of the Fed's interest rate decision later in the day.

The pan-European STOXX 600 index is down 0.8 per cent at this hour. On Tuesday, the index registered its longest winning streak since January. Here's what some of the key indices in the region look like: 

• The UK's FTSE 100: down 0.6 per cent 
• France's CAC: down 1.9 per cent
• Germany's DAX: down 0.8 per cent