Interest Rates Update!

The US Fed increased interest rate by 0.25%, bringing the fed rate to between 4.5%. The Fed added that while inflation had eased somewhat, it remained elevated. Powell, the Fed Chief, signaled concern about the risks of doing too little to tame inflation rather than squeezing the economy too much.

In December, most officials projected the fed funds rate would peak at 5.25%. However, the market had priced in a peak rate just below 5 per cent in the 2nd quarter and 0.5% of cuts by the end of the year. That has set the stage for a shock if the inflation data disappoints and the Fed tightens further as a result.

U.S. Labor Department reported 517,000 jobs added last month and the unemployment rate fell to 3.4%, the lowest in more than 50 years. Traders pushed out their expectations for eventual Fed rate cuts after the jobs report, pricing them to start in November versus in September previously. Powell has said he does not expect inflation to fall fast enough to allow the Fed to cut rates at all this year.