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The market “holds its breath” waiting for the outcome of the Fed meeting

Hoang Hai, Le Tuyen (VTV TV reporter residing in the US)Wednesday, May 4, 2022 08:56 GMT+7

Last night in Vietnam time, the Federal Open Market Committee, the policy-making body of the US Federal Reserve (FED) began its first meeting day. This is one of the most interesting economic events this week.

Tomorrow (May 5), the Fed has to announce the step interest rate their next. The Fed ignored the April meeting as a way to cool the market, but reduced in rhythm, not necessarily reduced in gain.

Page Marketwatch wrote: “The Fed increased half a percentage point in this meeting as clear as day”. The bank could also announce a program of quantitative tightening by adjusting its balance sheet, bringing in $95 billion a month soon.

Evidence for this forecast, according to economists, last week the Fed Chairman himself said in a meeting at the International Monetary Fund that the option to increase 0.5 percentage points has been put on the table for the May meeting. .

An increase of 0.5 percentage points means an increase of 2 times before. This is somewhat unusual for the Fed. The last time this bank did so was in 2000. The continuous increase in meetings was from 2006.

The Wall Street Journal Comment: “The Fed is in a hurry this time. They have to withdraw the economic support package because inflation reached 6.6% in March”. Economist at Grant Thornton said: “The Fed is no longer the type to wait for the paint to dry. It is forced to do two things at the same time: raise interest rates and tighten the support package, but no one is sure about the impact of tightening. This also makes it difficult for the Fed to calculate how much interest rate increase is enough to cool down inflation without adversely affecting economic growth.

‘s financial page CNN According to that, in 2021, the FED has ignored the warnings of economic experts to let the monetary policy be too loose for a long time, so if now, “the emergency brake” will create a “hard landing” for the economy. economy.

Hard landing, follow CNBC, is the risk of a possible recession. Former Fed Vice Chairman Roger Ferguson said: “The risk of an economic recession at this stage is almost unavoidable.” However, according to him, if unfortunately it happens, it will be 2023 and hopefully a mild recession for the US economy.

The market held its breath waiting for the outcome of the Fed meeting - Photo 1.

Fed Chairman Jerome Powell. (Photo: AP)

However, these are all just forecasts, both an increase of half a percentage point and the possibility of a recession. The market is waiting to see how after this meeting, Fed Chairman Jerome Powell will explain the impact of the new step on inflation and economic growth, because surely, the Fed also knows if they brake. fold 1 “policy bus” at the bend, what will happen.

Wall Street cautiously waits for the outcome of the Fed meeting

While waiting for the official results from the meeting, the US stock market had a cautious trading session of investors.

At the end of trading session on Tuesday (May 3) on the New York Stock Exchange, all 3 main indexes gained slightly. In which, the highest gain belonged to the S&P 500 index with nearly 0.5%, to 4,175 points at the close. The Dow Jones and Nasdaq were up slightly around 0.2%. These developments are similar to the trading session on Monday (May 2).

According to experts, this is the time when Wall Street investors are cautiously waiting for the official results from the US Federal Reserve meeting to be announced tomorrow (May 5).

In the context that US inflation is at the highest level in more than 40 years, it is forecast that the FED may decide to increase interest rates by 0.5 percentage points at this meeting. Specific plans to reduce the amount of bonds held on the balance sheet are also expected to be announced.

With tight monetary policies and the possibility of slowing growth of the US economy, preserving capital is the main goal of investors at this time.

On the commodity exchange also witnessed similar developments, at the end of the session, the gold price was almost flat when the possibility of the Fed raising interest rates would make this investment channel less attractive.

According to experts, raising interest rates to curb inflation will be one of the main goals of the US Federal Reserve in 2022. If interest rates are raised by half a percentage point at this meeting, this will be the first time. 2nd FED made such a high interest rate jump since 2000 to present.

The Fed is expected to raise interest rates sharply The Fed is expected to raise interest rates sharply – As expected, in the next week, the FED will double the level of control over record-high inflation in the US, while facing a series of shocks both internally and externally.

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