wall street closed higher on Wednesday, after investors digested the minutes of the last meeting of the Federal Reservewhich offered new clues about the central bank’s rate policy and its fight against inflation.
Following a brutal fall in global stock markets in the first half of the year, nervous investors are closely watching central bank actions as they try to gauge the impact of aggressive rate hikes on global growth.
The S&P 500 gained 13.69 points, or 0.36%, to 3,845.08 units, while the nasdaq advanced 39.61 points, or 0.35%, to 11,361.85 points. The Dow Jones Industrial Average it rose 69.86 points, or 0.23%, to 31,037.68 units.
The minutes of the monetary policy meeting on June 14 and 15 detailed how the central bank of USA it was driven to hike interest rates out of proportion to deal with inflation and concerns about loss of confidence in the power of the Federal Reserve.
The 0.75 percentage point interest rate hike was the first of that magnitude since 1994. According to the minutes, participants felt that a hike of 50 or 75 basis points would likely be appropriate at this month’s policy meeting.
Prior to the release of the minutes, investors had anticipated a new rate hike of 75 basis points at the July 26-27 meeting, so the fact that 50 basis points is also still on the table suggests that the Fed recognizes the impact on the economy.
The minutes reflect participants’ concern that rate hikes will have a “bigger-than-expected” impact on economic growth.
“I think people are very focused on the terminal rate of what the Federal Reserve hikes are, and the 50-75 debate just points to where it ends,” said Jason Pride, director of private equity investments at Glenmede. .
Pride noted that a hike of 50 basis points would point to a terminal rate of 3%, while a hike of 75 basis points indicates a maximum of 3.25% or 3.5 percent. At 3.5% or more, the chance of a recession is about 50 percent.
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