Market Extra: Stock market could ‘take it hard’ as expectations grow for a 6% fed funds rate

by | Mar 8, 2023 | Stock Market

U.S. stock investors are clearly not too happy with what Federal Reserve Chairman Jerome Powell has said in the past two days. And there’s reason to think they’ll get even more dissatisfied in the weeks and months to come amid growing expectations that the fed funds rate may reach 6% this year, one of the highest levels in the past two decades. Rick Rieder, chief investment officer of global fixed income for New York-based BlackRock Inc.
put a 6% level for U.S. interest rates on the map following Powell’s first day of testimony to Congress on Tuesday. BlackRock is the world’s largest asset manager, overseeing almost $8.6 trillion as of December. Its view has only gained further traction as Powell testified again on Wednesday, according to FHN Financial’s Chief Economist Chris Low and Ben Emons, a senior portfolio manager at NewEdge Wealth, who are both in New York.Powell took pains on Wednesday to clarify that policy makers have not yet made any decision about the size of March’s rate hike and are not on a “pre-set” course, helping to take some of the sting out of his otherwise hawkish message this week. U.S. stocks finished mostly higher, though the policy-sensitive 2-year Treasury yield
inched further above 5%, and the Treasury curve went more deeply negative in a worrisome sign about the economic outlook. The ICE U.S. Dollar Index
rose to its highest level of the year, and traders factored in an 77.9% chance of a half-percentage-point Fed rate hike on March 22.With investors and traders largely focused on the size of the Fed’s next interest rate hike i …

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