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It was a unanimous interest rate committee that was behind the decision to raise the interest rate by half a percentage point on Wednesday night. The key policy rate will now be in the range of 0.75 to 1.0 per cent.
At first, there were no new signals of further interest rate increases. Powell estimated in March that the key policy rate towards the end of the year will be 1.9 per cent.
The interest rate decision was received with uncertainty on Wall Street. Three quarters of an hour after the interest rate decision, the three central indices on Wall Street had fluctuated up and down from plus to minus and back several times.
After Powell ruled out new interest rate hikes that could be even bigger, ie 0.75 percentage points, Wall Street rose sharply. In the last hour alone, the three key indices rose another one percent from already resilient upswings.
- The S&P 500 ended up 3.04 percent
- Nasdaq Composite up 3.19 percent
- Dow Jones up 2.87 percent
According to the news agency AP, Wednesday’s rise was the largest in two years.
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The big tech companies, Apple and Meta, were up more than two percent before the announcement, while the others were in the red. After the interest rate decision, they fell back a bit, but just over an hour later, everyone is in solid plus, before they also rose further before the trading day was over:
- Apple: + 4.1 percent
- Microsoft: +2.9 percent
- Amazon: +1.4 prosent
- Alphabet C: +4.2 percent
- Tesla: +4.8 percent
The oil price also received a new boost after the interest rate rise, and Brent oil with delivery in June will be sold at 22.07 on Wednesday night just over 110 dollars a barrel. It’s up $ 5.50 since Tuesday.
Historic
It is 22 years since the last Federal Reserve, the US Federal Reserve, raised the key interest rate by as much as 0.5 percentage points. While the normal is 0.25 percentage points and some have argued that now it is all needed 0.75, the market priced in a 99 percent chance that the interest rate increase on Wednesday should land at 0.5 percentage points.
On Monday and Tuesday, all three indices rose, but since the New Year, the US stock markets have been in turmoil, especially due to fears of further rising inflation.
Confidence in the central bank has weakened in recent months after the Fed, until a few months ago, insisted that the increasingly galloping rise in prices was of a short-lived nature.
Fear of inflation lurks
The goal for the central bank is to try to calm inflation, which is at historically very high levels.
US inflation rose in March to 8.5 percent on a 12-month basis, the fastest increase in 40 years.
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The big fear is the prolonged recession, where the economy is falling, which often means rising inflation.
Last week, it became clear that the US economy (GDP) surprisingly fell by 1.4 percent in the first quarter on a 12-month basis. In comparison, growth in the fourth quarter was significant, 6.9 per cent. The background for the decline in the first quarter was an increasing trade deficit, with exports falling and imports rising at higher prices, while consumption growth increased from 2.5 to 2.7 per cent. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other use of all or part of the content may only take place with written permission or as permitted by law. For additional terms look here.
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