Markets prior to the Fed’s decision
Leading up to the Federal Reserve’s 2 p.m. decision, the S&P 500 traded about flat. The Nasdaq Composite was lower by 0.2%, and the Dow Jones Industrial Average was higher by nearly 180 points or 0.5%.
The 10-year Treasury yielded 4.31%, down about 4 basis points, while the 2-year Treasury inched lower by 5 basis points to trade at 5.05%.
–Darla Mercado
Don’t expect too many clues on November’s Fed meeting, says Russell Investments’ BeiChen Lin
Investors will keep an eye out for hints from the Federal Reserve on how policymakers may move forward at the November meeting, but they are likely to be disappointed, said Russell Investments’ BeiChen Lin.
“Although the Fed will be releasing updated dot plots that will show how Fed members see interest rates evolving, [Chair Jerome] Powell will likely continue to emphasize that those are merely projections, and not a pre-set course,” said Lin, investment strategy analyst at Russell.
He expects that Powell will go “through a plethora of ways to say, ‘No, we have not yet made up our mind about the November meeting.'”
“Could the markets become optimistic in the near term if the dot plots imply we won’t see a November hike? Yes,” he said. “But we wouldn’t celebrate too quickly.”
“We would stay disciplined and refrain from chasing any near-term excitement in the equity markets, Lin added.
-Darla Mercado
How the Federal Reserve’s interest rate hikes have affected consumers
The Federal Reserve is widely expected to hold steady on its rate policy Wednesday afternoon, but the central bank’s work has already had a sizeable impact on consumers.
Since the Fed has embarked on its rate hiking, the annual percentage yield on a five-year certificate of deposit has jumped to 2.83% as of the week of Sept. 15, according to data from Haver. That compares to a meager 0.5% during the week of March 11, 2022. Yields on money market funds have also leapt to 0.56% from 0.08%, Haver found.
Even Treasurys are proving to be exciting. The two-year Treasury yield was 5.06% Wednesday morning. It was 1.75% on the week of March 11, 2022, according to LSEG.
Higher rates are also hitting spenders in the pocketbook. Credit card rates were 20.71% as of last week, according to Bankrate. That compares to 16.34% during the week of March 11, 2022.
Further, the total interest paid on a $350,000 mortgage at 7.29% would be about $513,000 over the life of the 30-year note, according to Bankrate. A borrower would have paid $273,000 in interest on the same note back when the rate was 4.29%.
–Nick Wells, Darla Mercado
Here’s what’s ahead as the Fed wraps its September meeting
The Federal Reserve is expected to keep steady on the benchmark borrowing rate at the end of its September policy meeting, but investors will likely have a close eye on the central bank’s economic updates.
In addition to the rate decision, the Fed will also issue its dot plot, which spells out policymakers’ expectations for rates. In particular, the “longer run” median dot – an indication of where rates are headed beyond 2026 – will likely be a focal point for traders.
The Fed’s summary of economic projections is also on deck, detailing the central bank’s outlook for rates, GDP growth inflation and other key metrics.
Naturally, all eyes will be on Fed Chair Jerome Powell as he takes the podium at 2:30 p.m. ET and speaks to the press. He will offer further detail on policymakers’ latest decision.
Read more about what to expect from the central bank here.
–Darla Mercado, Jeff Cox
Read the full article here
