The Fed raised, as expected, its key rate by 0.75 percentage points on Wednesday, bringing it to a range between 3.75% and 4%, the highest in nearly 15 years.
In the statement announcing the decision, the Fed’s Monetary Policy Committee said that in determining the path of rates, it would “take into account the cumulative effect of the monetary tightening” already carried out on economic activity.
Chute de Dow Jones
This mention “sent to the markets the signal that the Federal Reserve would be very cautious after the next two rate hikes”, explained Tom Cahill, of Ventura Wealth Management.
“But the (Chairman Jerome Powell’s) press conference that followed reaffirmed that the Fed still had some way to go…and that it was premature to talk about a pause in rate hikes, and it drove the market down,” he added. In the red before the Fed’s announcements, the Dow Jones thus took up 1.28%, before falling.
Fed warning
“Inflation is proving to be a tough opponent to beat and the Fed has warned against overly optimistic expectations of a return to more accommodative monetary policy,” said Susannah Streeter of Hargreaves Lansdown.
Traders now estimate more than 70% the probability that the Fed rate will rise above 5% by next May, a scenario that he did not even envisage a month ago.
After easing, bond rates bounced back to stand higher than their level the day before. The yield on 10-year US government bonds stood at 4.08%, against 4.04% the day before.
Apple and Amazon affected
Unsurprisingly, the prospect of higher rates for longer has chilled the tech sector, which is highly dependent on the cost of cash to fund its growth.
Apple (-3.73%), Microsoft (3.54%), Alphabet (-3.79%), Tesla (-5.64%) and Amazon (-4.82%) all took a shine, this latest descending even to its lowest level since March 2020, in the early days of the pandemic.
The movement affected Airbnb (-13.43% to 94.41 dollars), despite the publication of a turnover and a net profit above expectations.
The platform predicts a slight slowdown in booking growth for the last quarter of the year, compared to the July-September period.
afp/hkr