Ahead of Wednesday morning’s Federal Reserve meeting, indications emerged that Dow Jones futures fell 0.2% over quotes, while S&P 500 futures fell 0.3% and Nasdaq 100 by 0.5%.
The US, the equity market rally rebounded on Tuesday, making up for much of Monday’s pullback.
Forecasts were for the Federal Reserve to cut its hike rate for the second consecutive time at its recent meeting, bringing the federal funds rate to a range of 4.5% to 4.75% on the afternoon of Wednesday.
This move follows a half-point hike in December after four consecutive 75 basis point hikes in November.
Most investors believe the Fed will revise the rate again by a quarter point at the end of March, within a range of 4.75% to 5%. After that, however, the Fed would be expected not to hike rates further.
Indeed, the Fed’s move matched expectations as the Federal Reserve raised rates by a quarter of a percentage point, placing the Fed funds rate in a range of 4.5 to 4.75%, the highest rate since September 2007.
The central bank reduced the pace of monetary tightening after six sizable hikes (four hikes of three-quarters of a percentage point between June and November and another two of half a percentage point).
Jerome Powell, head of the Federal Reserve, in a speech at 2.30 pm, reiterated the Fed’s commitment to maintaining current interest rates, assuring that they will be “appropriate to achieve a monetary policy stance tightening enough to restore the inflation at 2% over time”.
Powell stressed that inflation “has eased slightly but remains elevated.”
In January, China’s manufacturing Purchasing Managers’ Index (PMI) was still struggling with the fallout from COVID-19, and Japan’s PMI is at a 26-month low. The Nikkei was up 0.07% on Wednesday morning, Hong Kong was up 0.84%, and Shanghai was up 0.9%.
Equity markets follow Wall Street’s gains as signs of weakening in the US have strengthened speculation that Federal Reserve policy will no longer become so harsh.
China’s Caixin manufacturing index rose by 0.2 points in January, reaching a value of 49.2. The day before, China’s government manufacturing index rose 3.1 points to 50.1, just above the 50-point mark that marks the line between expansion and contraction.
US stocks finished in positive territory: the S&P 500 rose 1.05% to 4,119.21, the Dow Jones gained 0.020% to 34,092.96, and the Nasdaq gained 2.00% to 11,816.32.