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Lazaros Kotsidis
Mar 22, 2023 10:25AM ET
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Investors Anticipate Risk-On Signals in Tomorrow's Fed Meeting: Are They Wrong?
www.investing.com/analysis/investors-anticipate-riskon-signals-in-tomorrows-fed-meeting-are-they-wrong-200636455
Investors Anticipate Risk-On Signals in Tomorrow's Fed Meeting: Are They Wrong?
By Francesco Casarella/Investing.com | Mar 21, 2023 07:05AM ET - The Fed will decide on interest rates tomorrow, with a high likelihood of a 0.25% increase
- A pause in the rate cycle would undermine the Fed's credibility, while a 0.5% hike could create fear among investors
- Markets anticipate a positive trend post this meeting, reflected in rallies of risk-on assets, which have struggled due to high interest rates
Tomorrow will be one of the most eagerly awaited days for the markets. The Fed will decide on interest rates. The odds favor a 0.25% increase, as we can see from our Fed Rate Monitor tool.
Source: Investing.com
Recently, in the wake of the banking crisis, some analysts and investment bankers dared to suggest that Powell might do nothing at all at this meeting.
In my opinion, this would be very dangerous because it would totally undermine the credibility of the Fed, which, I recall, already made a stupid mistake along with the ECB in 2021 when they talked about transitory inflation.
It's important not to repeat the mistakes of the past. To avoid this, a 0.25% increase is the most sensible option, as it strikes a balance. No hike would suggest that the Fed is vulnerable to market forces and the banking crisis.
Meanwhile, a 0.5% hike could create more fear among investors and demonstrate that the Fed is indifferent to the effects of high interest rates on the economy. The modest hike is the best choice, as it signals a measured response to current economic conditions.
But most of all, with the 0.25% hike (almost) certain, it will be interesting to hear Powell's words to see if we are indeed close to a turning point or if we should expect another hike.
Currently, the markets seem to be betting on a bullish path between this and the next meeting. This is reflected in the rallies in the NASDAQ Composite, gold futures, Bitcoin and silver futures.
These assets have previously struggled in the bear market conditions created by high interest rates.
***
Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, consultation, or recommendation to invest and, as such, is not intended to induce the purchase of any assets. I would like to remind you that any type of investment is evaluated from multiple perspectives and is highly risky and, therefore, any investment decision and the associated risk remain with the investor.
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Investors Anticipate Risk-On Signals in Tomorrow's Fed Meeting: Are They Wrong?
Comments (17)
DuckSoup
Mar 21, 2023 8:28PM ET
Go ahead … continue destroying wealth and lives with another rate hike.
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Lazaros Kotsidis
Mar 21, 2023 8:28PM ET
Well it was free money and now must be taken back. Nothing is free.
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Mar 21, 2023 8:06PM ET
They can't do nothing, that is not plausible. The Fed appears to have protocols in place to handle systemic banking risks. They were probably going to do a 1/4 point rate in increase in May anyway. There will be 6 weeks of financial data before the May meeting, that would be the meeting to pause if needed.
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Joe Shmo
Mar 21, 2023 7:48PM ET
It makes more sense to me that the higher interest rate environment is exposing institutions that have bad, risky financial practices. Maybe this is more indicative of what reality should be, rather than waiting for the Fed to pivot to the ridiculous rates we've had the past few years.
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jason xx
Mar 21, 2023 4:22PM ET
Hmmm Idk but neither do you
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naser hadivand
Mar 21, 2023 1:58PM ET
We Iranians have an example: eat less, eat more. In my opinion, the Federal Reserve should have given the economy a little time to digest those strong interest rates, that this strictness combined with a very contractionary tone has made the situation so critical. Tomorrow, everyone is waiting for the interest rate.The interest will be the tone and type of Paul's words, for my part, I don't want to be in Pavel's position. If trust is lost or damaged, the situation will become more critical, even with a 25% increase and in the current situation, this prescription will be like giving painkillers to an incurable disease.
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jason xx
Mar 21, 2023 1:58PM ET
Huh???
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Fred Godbout
Mar 21, 2023 11:54AM ET
The democrats have destroyed the US economy. The banking crisis is merely a symptom. Stick a fork in her she all done.
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Junie Elizabeth
Mar 21, 2023 11:54AM ET
there's always one
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Alex Smirnov
Mar 21, 2023 11:52AM ET
Nope. But they never right either.
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dim dim
Mar 21, 2023 11:42AM ET
it is not a bank, it has no money, it is private, etc., FED proves that it is something without seriousness and brings only disasters, it must be dissolved with irrational, stupid interest rate increases, now it is bringing the abyss / dissolution of the US economy, soon the citizens of USA, they won't even be able to buy bread...!!!
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its private
Mar 21, 2023 11:22AM ET
half a percent hike. get inflation under control. the fed already setup a loan program for the low yield assets.
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