Fed meeting outcome: No rate hike during emergency meeting, market zooms

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Fed Meet Outcome 14 Feb

We covered in detail yesterday the inflation worry in the US and the Fed's unexpected meeting. The meeting concluded yesterday, let us look at the updates and what the market thinks now.

Update after the meeting

  • The Federal Reserve did not increase the interest rate hike in yesterday's meeting as was expected by certain experts.
  • They have said that no rate hike will happen in between the actual meeting. The rate hike would have caused alarm among investors as a rate hike in the Adhoc meeting is done during an emergency. The Fed believes things are still under control, and there is no need to press the panic button.
  • The rate hike will start from March and will be smaller than what many investors have begun to expect.
  • One of the Federal Reserves' members has said that investors will see a rapid pace of interest rate increase, and rates can go up about 1% by July.
  • Most Fed officials have been less willing to commit to a half-point hike or were even concerned it could cause trouble.

What are experts saying?

  • The next meeting is on 16 March, and experts believe that the Fed may move rates up by 0.50%. Generally, the Fed moves rates up or down in 0.25% increments, but the inflation number indicates it could be higher in March.
  • The March meeting is crucial since the Fed has the target to bring back inflation to around 2%. Currently, inflation is more than three times the Fed's target. Hence, the Fed may take extreme measures in March.

What should investors do?

The Fed did not increase the interest rate in yesterday's meeting. It has come as a temporary relief to investors. However, the uncertainty of how much rate hike will happen in March will keep investors on edge. 

Retail investors should avoid investing a lumpsum amount in the market till then. They should continue the regular SIPs and closely watch the macroeconomics. Keep track of developments around Ukraine-Russia news too. Check out our article on that for the latest updates.