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The Fed raises rates by 75 points. Anti-inflation increase to 3.25% – & More Latest News Here



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The Fed raises rates by 75 points.  Anti-inflation increase to 3.25%

As predicted, the US Central Bank (Fed), by stepping up its fight against chronically high inflation, has raised its interest rate by 75 basis points, or a full three-quarters of a point for the third consecutive time, an aggressive pace that the risk of a possible recession is increasing. The increase in the short-term reference rate by “unanimous decision” is in a range between 3% and 3.25%, the highest level since the beginning of 2008. By the beginning of 2023, for , a further increase is expected, although at some point it will become appropriate to slow the speed of these increases, Fed Chairman Jerome Powell explained, noting that the increases will be driven by economic data and will be decisions made on a meeting-by-meeting basis.

The Fed’s strategy

The central bank action followed a government report last week that showed the continued rise in prices for rents and other services, although some previous inflation factors, such as gas prices, have eased. But the war in Ukraine weighs on the American and global economy, the Fed says.
In concrete terms, the Fed’s decision to raise interest rates makes it more expensive to take out a mortgage or a loan to purchase a car. In this way, consumers and businesses are presumably led to spend less and borrow less, cooling the economy and slowing inflation.

Looking for a “soft landing”

While cutting the US growth forecast in 2022 to + 0.2%, Fed officials say they are looking for a “soft landing”, with which they can slow growth sufficiently to contain inflation, but not so much as to trigger a recession. However, economists are increasingly convinced that the Fed’s steep rate hikes will, over time, lead to job cuts, higher unemployment and a full-blown recession later this year or early this year. next. After all, President Jerome Powell acknowledged in a speech last month that the Fed’s moves “will bring some pain” to families and businesses. And he added that the Central Bank’s commitment to bring inflation back to its “unconditional” 2% target. Meanwhile, the drop in gas prices slightly reduced headline inflation, which was still a painful 8.3% in August compared to a year earlier. Falling gas prices may have contributed to the recent rise in President Joe Biden’s approval rating, which Democrats hope will help boost their prospects in the November midterm election.

Football Highlights

2-year Treasuries are flying 4%: highs since 2007

Waiting for Fed decisions to the day sent two-year Treasury rates to 4%, their highest since 2007. Concerns about an escalation of the war between Russia and Ukraine have slightly dampened the upward trend. had characterized the performance of US securities in recent days, but rates are still high. The yields of the benchmark 10-year bonds stand at 3.542%, the highest since April 2011. The yield curve, strictly observed, between the two-year and 10-year yields, stood at minus 43 basis points.
Wall Street, for its part, reverses course and goes negative after the decision of the Federal Reserve. Immediately after the decision was made, the Dow Jones lost 0.72%, the S&P 500 fell 0.73% while the Nasdaq left 0.72%.

The European stock exchanges

European lists in great shape on the day of the Fed and despite the threats of Russian President Putin and the escalation of tension in Ukraine. In fact, the Old Continent lists closed the session up sharply, driven by defense, energy and utility stocks, with Milan recording a rise of 1.2% at the end. But to partially cloud the wait for the Fed (European lists closed before the announcement) was the call of Russia to a partial mobilization of Russians in military age, an escalation that resulted in the rally in the stock market. defense and with the oil sector rising. In Milan, Leonardo shot (+ 5.54%) but the best was Tim (+ 5.7%), who benefited from the announcement of the entry into Vodafone of Xavier Niel, founder of Iliad, rekindled the hypothesis of operations extraordinary in the telecommunications sector. The best sector in Europe was that of utilities, after the bailout and nationalization of Uniper, the largest German importer of Russian gas in liquidity crisis, which collapsed on the stock market but reassured us of the possible risk of contagion.

Euro, dollar, gas and oil

The Fed’s expectation has brought the euro below 0.99: the single currency at 0.98753 (0.9987 yesterday). Dollar / yen at 144.12 (from 143.27). Euro / yen at 142.36 (from 143.37). The price of gas closed in sharp decline, after the surge this morning with the speech by Russian President Vladimir Putin on the war in Ukraine. In Amsterdam, prices fell by 2.3% to 189 euros per megawatt hour. Price down also in London where it stood at 279 pennies per Mmbtu (-11.4%). . Oil also fell, which ran in the morning: Wti at 86.66 dollars (-1.13%) and Brent at 89.7 dollars (-1%).

The spread closes down

The spread between BTP and German Bund closes down to 222 basis points, compared to 225 points yesterday. The yield on the Italian ten-year period also falls to 4.11%, compared to 4.17 on the eve of the day. Two-year government bonds are in tension with the yield of the Italian BTP rising to 2.718% (+2 basis points), the highest since 2012 and higher than that of Greece (2.47%) which increases by 8 points. The rate of the Spanish government bond also rises to 1.92%. Read the spread in real time here.

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