In the past, the Federal Reserve was accused of “working for Wall Street”. This claim is questionable, but there is no doubt that the Fed watches markets. It’s no secret.
When the Fed basically told us that it is raising rates in March, many thought that the Fed has upgraded its forecasts and is set to accelerate the pace of the rate hikes.
The Fed took its sweet time to prepare us for a hike in 2015, waited a year until the next hike and suddenly it raised rates within three months. So, it is hard to blame those market participants for understanding that the Fed is more confident.
So when the Fed raised rates but left everything else unchanged, the dollar crashed. Here are the 5 reasons to why the dollar fell on the hike.
And while the article linked above explains the reaction, why did they do it?
My associate Lior Cohen of TradingNRG discussed the option of the Fed “sneaking in” a hike because of the stock market rallies.
Indeed, records are set in many stock indices, mostly due to high expectations from the new administration. With headlines about the Dow Jones Industrial Average topping 20K and swiftly crossing 21K soon after, markets are looking quite rosy.
This rosiness might not stay for too long. Trump will reach his 100 days without a huge fiscal stimulus program and many other worries await from the slow growth in the US economy, politics in Europe and what not.
With the hike we have just witnessed, the theory of the Fed sneaking in a rate hike now while it’s possible but backing down and sitting on their hands for longer makes more sense.
What do you think?
Fed hike in the Ides of March – all the updates in one place
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