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The Federal Reserve has raised the US cash rate by 25-basis points as the market expected at the conclusion of the FOMC meeting overnight. The Fed has now eased rate hikes for a second straight month for the cash rate to sit between 4.5%-4.75% but said it will need to continue raising rates in order to reach a stance of monetary policy that is sufficient to return inflation to the target 2%. Recent favourable economic data including lower consumer spending and slowing economic growth in the US were contributing factors to the Fed’s rate hike decision.
US markets rebounded in afternoon trade to close the day higher as the Fed pulled back its pace of rate hikes. The Nasdaq rose 2% boosted by gains in chipmakers on the back of strong earnings out of Advanced Micro Devices. The S&P500 reversed an earlier loss to close the session up 1.05% and the Dow rose 0.02% at the closing bell.
European markets closed mixed on Wednesday as investors awaited the Fed’s latest interest rate decision which was released after the closing bell in Europe. Germany’s DAX added 0.35%, while the French CAC fell 0.07% and in the UK the FTSE100 fell 0.14%.
Investors expected the 25-basis point rate hike announced by the Fed overnight however will continue to monitor commentary around the decision to gain any insight into what other central banks around the world might do at their respective rate hike meetings over the coming days.
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