Higher and higher

Financial markets tumbled last week after the Federal Reserve’s (Fed) latest policy meeting. Though the Fed kept its policy settings steady, Fed Chair Jerome Powell’s statement was more hawkish than what investors had expected. The US dollar index (DXY) gained 0.4 percent since the Fed meeting last Wednesday. The S&P 500 fell 2.8 percent in three consecutive down days. Bonds tanked as US Treasury yields jumped to their highest levels since 2007.

One more time

In his speech, Powell noted that majority of FOMC members expect one more rate hike for this year. This dashed market expectations that interest rates have already peaked. Powell also said that the latest dot plot for 2023 and 2024 moved up by 50 basis points, indicating a more hawkish outlook. Below, we summarize important quotes from Powell’s statement last week.

• “Looking ahead, we are in a position to proceed carefully in determining the extent of additional policy firming that may be appropriate. Our decisions will be based on our ongoing assessments of the incoming data and the evolving outlook and risks.”

• “The process of getting inflation sustainably down to two percent has a long way to go.”

• “We are prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective.”

• “Majority of participants believe that it is more likely than not that it will be appropriate for us to raise rates one more time in the two remaining meetings this year.”

• “If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 5.6 percent at the end of this year, 5.1 percent at the end of 2024,