NEW YORK, July 28 ― US equities rose sharply and the dollar lost ground as investors bet the Federal Reserve would slow interest rate hikes following its announcement yesterday of an increase in rates in line with expectations.
The Fed is pushing up rates to cool the sharpest inflation since the 1980s and signalled “ongoing increases” in borrowing costs may still be ahead despite evidence of a slowing economy. Some strategists pointed to Powell's lack of guidance for a specific rate hike in September and his comment that previous hikes would keep reducing inflation as potentially dovish signs.
Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis noted that Powell “acknowledged the weakness showing up in real economic growth” and was waiting for economic data in the next few months before giving guidance. He added that anything other than the 75 basis point increase would have been negative: “Too little would've undermined confidence in the Fed and too much would have undermined confidence in the economy.”The Japanese yen strengthened 0.26 per cent versus the greenback at 136.58 per dollar, while Sterling was last trading at US$1.2153, up 1.06 per cent on the day.