Zürcher Nachrichten - Fed signals first US rate hike since pandemic coming in March

EUR -
AED 3.821609
AFN 73.043711
ALL 98.561994
AMD 415.734952
ANG 1.874008
AOA 948.892795
ARS 1067.239304
AUD 1.668181
AWG 1.872815
AZN 1.757682
BAM 1.956454
BBD 2.099482
BDT 124.256752
BGN 1.957817
BHD 0.392426
BIF 3074.798113
BMD 1.040453
BND 1.412959
BOB 7.185402
BRL 6.442694
BSD 1.039838
BTN 88.511732
BWP 14.441688
BYN 3.402905
BYR 20392.87375
BZD 2.092379
CAD 1.496535
CDF 2986.099191
CHF 0.93648
CLF 0.037319
CLP 1029.739995
CNY 7.591767
CNH 7.598484
COP 4556.381863
CRC 527.971385
CUC 1.040453
CUP 27.571998
CVE 110.297624
CZK 25.115501
DJF 185.171889
DKK 7.460816
DOP 63.34117
DZD 140.687327
EGP 52.961546
ERN 15.606791
ETB 132.39725
FJD 2.412966
FKP 0.82402
GBP 0.828196
GEL 2.923108
GGP 0.82402
GHS 15.285109
GIP 0.82402
GMD 74.912518
GNF 8986.65805
GTQ 8.0096
GYD 217.552711
HKD 8.081868
HNL 26.41983
HRK 7.46307
HTG 135.964135
HUF 410.690109
IDR 16866.571316
ILS 3.790359
IMP 0.82402
INR 88.614737
IQD 1362.155262
IRR 43790.051599
ISK 145.091415
JEP 0.82402
JMD 162.007918
JOD 0.737991
JPY 163.632522
KES 134.384575
KGS 90.519253
KHR 4179.356665
KMF 484.981066
KPW 936.406886
KRW 1516.386879
KWD 0.320615
KYD 0.866581
KZT 538.684863
LAK 22740.381777
LBP 93117.221839
LKR 306.450641
LRD 189.251433
LSL 19.334876
LTL 3.072187
LVL 0.629359
LYD 5.10451
MAD 10.485801
MDL 19.185228
MGA 4904.592084
MKD 61.579021
MMK 3379.349922
MNT 3535.458283
MOP 8.3185
MRU 41.508277
MUR 48.974372
MVR 16.027812
MWK 1803.102637
MXN 20.964801
MYR 4.668508
MZN 66.48881
NAD 19.335062
NGN 1610.226956
NIO 38.262788
NOK 11.815418
NPR 141.618971
NZD 1.843304
OMR 0.40057
PAB 1.039848
PEN 3.871945
PGK 4.220248
PHP 60.807174
PKR 289.478921
PLN 4.256856
PYG 8109.710445
QAR 3.781864
RON 4.974508
RSD 116.972699
RUB 104.513453
RWF 1450.570871
SAR 3.90625
SBD 8.722693
SCR 14.683216
SDG 625.834202
SEK 11.538871
SGD 1.414875
SHP 0.82402
SLE 23.721196
SLL 21817.776932
SOS 594.292914
SRD 36.476165
STD 21535.271101
SVC 9.098691
SYP 2614.168982
SZL 19.343279
THB 35.541837
TJS 11.375802
TMT 3.651989
TND 3.315608
TOP 2.436845
TRY 36.690385
TTD 7.066294
TWD 34.011368
TZS 2517.895925
UAH 43.598696
UGX 3806.235546
USD 1.040453
UYU 46.28369
UZS 13423.970506
VES 53.661818
VND 26469.117766
VUV 123.524633
WST 2.87455
XAF 656.17
XAG 0.035166
XAU 0.000398
XCD 2.811876
XDR 0.797259
XOF 656.151075
XPF 119.331742
YER 260.503326
ZAR 19.427453
ZMK 9365.323193
ZMW 28.777618
ZWL 335.025359
  • RBGPF

    -0.7000

    59.8

    -1.17%

  • RYCEF

    -0.0200

    7.25

    -0.28%

  • NGG

    -0.4000

    58.62

    -0.68%

  • BCC

    0.2950

    122.535

    +0.24%

  • BCE

    0.1050

    22.945

    +0.46%

  • SCS

    -0.0450

    11.605

    -0.39%

  • JRI

    0.0430

    12.143

    +0.35%

  • CMSC

    -0.2094

    23.6927

    -0.88%

  • RELX

    0.1220

    45.712

    +0.27%

  • RIO

    -0.1450

    59.085

    -0.25%

  • GSK

    -0.0850

    33.975

    -0.25%

  • AZN

    -0.3800

    66.25

    -0.57%

  • VOD

    0.0850

    8.455

    +1.01%

  • CMSD

    -0.2050

    23.345

    -0.88%

  • BTI

    -0.0350

    36.185

    -0.1%

  • BP

    0.0400

    28.79

    +0.14%

Fed signals first US rate hike since pandemic coming in March
Fed signals first US rate hike since pandemic coming in March

Fed signals first US rate hike since pandemic coming in March

Federal Reserve Chair Jerome Powell on Wednesday gave a clear signal the central bank is ready to raise US interest rates in March for the first time since cutting them to zero when Covid-19 broke out.

Text size:

That would end the era of easy money that fueled Wall Street's record-setting run during the pandemic.

In a press conference following the year's first meeting of the Fed's policy-setting committee, Powell underscored the central bank's willingness to fight rampant inflation, even as he expects prices to subside this year.

"I would say the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so," Powell said in an unusually frank comment on the Fed's planned actions.

He declined to discuss the possible size of the coming rate increase, but said the recovery in the world's largest economy is strong enough that it can handle higher borrowing costs.

He noted the strong rebound in employment following the catastrophe caused by Covid-19.

"There's room to raise interest rates without threatening the labor market," he said, describing conditions for workers and employers as "historically tight" with many businesses struggling to recruit staff.

The comments reflect the central bank's policy pivot as consumer prices rose seven percent in 2021, the highest since 1982. Officials late last year retreated from their insistence that inflation was transitory, and that rates could stay lower to ensure an inclusive recovery.

However, the policy-setting Federal Open Market Committee (FOMC) still expects price pressures to recede, amid "progress on vaccinations and an easing of supply constraints."

Powell echoed those comments in his press conference, noting that "the drivers of higher inflation" were predominantly due to "the dislocations caused by the pandemic," and "we continue to expect it to decline over the course of the year."

Wall Street indices saw solid gains early Wednesday, but turned sharply negative as Powell spoke and ended mostly lower.

- 'Liftoff' is coming -

While signaling a March increase, the FOMC left policy unchanged for now, keeping rates at zero and continuing moves to wind down its bond-buying stimulus program in early March.

The committee also released guidelines for "significantly reducing" the size of its massive stockpile of securities accumulated mostly during the recent economic crisis, when it intervened to bolster financial markets.

The FOMC provided no timeframe but said it "expects that reducing the size of the Federal Reserve's balance sheet will commence after the process of increasing the target range for the federal funds rate has begun."

Beth Ann Bovino, US chief economist at S&P Global Ratings, predicted the balance sheet reduction would not start until early next year and the March hike will be the first of several.

"We expect 'liftoff' to start in March with the first of at least three rate hikes this year," she said in a note, pointing to language indicating officials believe the US economy has hit "maximum employment," one of the Fed's two priorities.

- Easy money over -

Rate increases would end the party on Wall Street that has raged more or less non-stop during the pandemic thanks to the easy money policies the Fed rolled out to rescue the economy in March 2020.

Markets were selling off in anticipation of the meeting, with the Nasdaq, which is heavy with tech stocks that particularly benefit from easy access to finance, losing seven percent last week.

Edward Moya, senior market analyst at OANDA, blamed Wall Street's downturn during the press conference on both fears of balance sheet normalization and on jitters about rate hikes.

"The more Powell talked during the (press conference), the more hawkish he sounded," Moya wrote.

I.Widmer--NZN