Fed codes fourth straight 75bps rate hike – Stocks, bitcoin and metals rise

The U.S. Federal Reserve introduced another rate hike on Wednesday, November 2, 2022, raising the federal funds rate (FFR) by 75 basis points (bps). The U.S. central bank said on Wednesday that the hike is aimed at curbing inflation and the Fed states that “recent indicators point to modest growth in spending and output.“

The U.S. central bank raises the federal funds rate by 75 basis points (bps).

While U.S. President Joe Biden hosted an event entitled “Infrastructure Talent Pipeline Challenge“, the nation’s central bank once again raised the federal funds rate by 75 basis points on Wednesday. The markets had anticipated this 75 basis point increase well before the Federal Open Market Committee (FOMC) meeting.

Just before the rate hike, the White House reported according to Reuters that the Biden administration plans to allocate $13.5 billion to help low-income U.S. households pay for heating this winter. The move comes as runaway inflation has contributed to U.S. consumers paying 28 percent more to heat their homes than they did last winter.

“Recent indicators point to modest growth in spending and output“, said the FOMC. announcement said Wednesday. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains high, reflecting supply and demand imbalances related to the pandemic, rising food and energy prices, and broader price pressures“, the central bank added.

The Fed’s FOMC statement continues:

Russia’s war with Ukraine is causing enormous human and economic suffering. The war and related events are creating additional upward pressure on inflation and weighing on global economic activity. The Committee is paying close attention to inflation risks.

The Fed’s rate hike follows the report on the Personal Consumption Expenditures (PCE) price index, the U.S. central bank’s primary inflation indicator, which showed a 0.5 percent increase in September. In addition, the most recent Consumer Price Index (CPI) report, showed that U.S. consumer prices jumped 8.2 percent in September.

Stocks, bitcoin and precious metals rise on potential Fed pivot

Stocks jumped after the Fed announced a 75 basis point hike and interest rate increase. Bitcoin, too, jumped 1 percent within an hour of the announcement. The price of gold, per troy ounce, jumped 1% as well, while the price of an ounce of fine silver rose 1.58% above the $20 per ounce region.

Markets rebounded as the Fed’s announcement hinted at a possible pivot. “The committee will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments“, said the US central bank.

Freddie Mac reported last week that the average rate on a 30-year fixed mortgage has jumped above 7 percent, up from 3.14 percent a year ago. The FFR increase will likely slowly trickle down to mortgage, credit and loan rates, affecting every American citizen seeking access to these financial vehicles.

During Jerome Powell’s follow-up speech he continued to emphasize that rate hikes and monetary tightening were and are necessary to deal with the country’s runaway inflation. Powell repeatedly noted that the 2% inflation rate is still an important goal for the Federal Reserve to aim for at this time.

However, he also said that a slowdown in restrictive measures “is coming” and insisted that it could very well happen “at this next meeting or the next” when reporters asked the central bank chief if the Fed would pivot by December.

After Powell’s press conference with reporters, stocks, precious metals and bitcoin began to lose the gains they had made an hour after the FOMC statement was released. All four major stock indexes were down, gold was up 0.13% and bitcoin was down. Bitcoin was up 0.6 percent Wednesday afternoon.