U.S. stock index futures were higher on Federal Reserve Chair Jerome Powell’s comment that super-sized interest-rate hikes will be rare following the central bank’s biggest increase in borrowing costs since 1994.
S&P 500 futures rose 0.54%; Nasdaq 100 futures climbed 0.68%.
The Fed raised rates by that amount Wednesday, stepping up the fight against inflation. Powell signaled another big hike in July but added “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.” That leans against the risk of a string of jumbo moves.
A dollar gauge and the yen slipped, while risk-sensitive currencies like Australia’s dollar advanced. Cryptocurrencies -- emblematic of recent market stress due to tightening financial conditions -- staged a broad advance.
Wednesday’s decision took the target range for the federal funds rate to 1.5% to 1.75%. Officials projected 3.4% by year-end and 3.8% by the end of 2023. The Fed also reiterated it will shrink its balance sheet by $47.5 billion a month -- a move that took effect June 1 -- stepping up to $95 billion in September.
“75 basis points is a solid showing that will, all else being equal, serve to improve Fed credibility and leave monetary policy slightly less behind the inflationary curve,” Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets, wrote in a note. “The response in risk assets will ultimately define the extent to which the Fed will be able to normalize monetary policy.”
Whether the rebound in stocks and bonds is anything more than temporary is in doubt. Fears of an environment of sharply slower economic growth and elevated price pressures continue to shadow markets.
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