The Fed’s commitment to curbing inflation brought a rally to the Wall

Wall Street traded higher on Wednesday, ending a five-day slump after interest rates rose 0.75% from the Fed and Powell signaled a similar rise in July, a move that convinced them investors that the central bank is determined to tackle inflation that has climbed to highs of more than 40 years.

The Federal Reserve today raised its third interest rate by a whopping 0.75%, in the range of 1.50% -1.75%, in the wake of the latest inflation data, last Friday, which showed that has made little progress in its battle for price relief.

Fed officials also signaled that the central bank would pursue a faster pace of rising borrowing costs to contain inflationary pressures, with central bank chief Jerome Powell leaving the possibility of a similar increase open in July.

In fact, central bank officials predict that interest rates will rise to 3.4% by the end of this year and 3.8% in 2023. Estimate significantly different from that of March when they talked about interest rates at 1.9% this year .

The Fed’s announcement temporarily led the Dow Jones and S&P 500 to a negative sign, but returned strongly during the Fed chairman’s regular press conference, which explained the central bank’s reasoning for the “unusually” high interest rate hike. the largest in almost 30 years.

The head of the Fed noted that today’s increase was necessary due to the unexpected jump in inflation recorded in May, and although he did not rule out a similar increase next month, he stressed that he does not expect such increases to become normal. At the same time, he assured that the central bank is not trying to lead the economy into recession, while he reiterated that he does not see any signs of a broad slowdown in the economy.

Powell’s rhetoric and the fact that the market had largely discounted the current rate hike, put the indices back on a strong uptrend, with their gains, however, moderating in the last half hour.

Indicators – Statistics

Thus, the Dow Jones industrial average, which started the session with a rise of almost 400 points, in the process slowed down and lost the sign shortly after the announcement of the Fed, recovered with a “jump” of over 600 points but eventually closed away. the highs of the day but with strong nevertheless gains of 303 points or 1%, at 30,668.53 points.

A similar course was followed by the wider S&P 500, which from + 1.4% returned to a temporary negative sign, recovered with a rally of 2.68% to “brake” in the final straight and finally closed at 3,789.99 points, with an increase of 1.46%.

The Nasdaq technology held a more stable course today, which despite the intense volatility moved permanently with a strongly positive sign and although it also slowed down shortly before the finish managed to finish above the level of 11,000 units and specifically at 11,099.16 units, with a “jump 2.5%.

Of the 30 shares of the blue chips index, only nine closed in the “red”, with the titles of Dow Inc. and Chevron to record the biggest losses, down 1.96% each. All the others closed higher, with Boeing leading the way with a “jump” of 9.46%, and Microsoft and Goldman Sachs following with 2.97% and 2.67% respectively.

Macro

At the macro level, US retail sales fell for the first time in four months, with vehicle markets plummeting on the broader picture, according to data released today.

In particular, the value of retail sales fell by 0.3%, according to the US Department of Commerce. Excluding vehicles, however, sales rose 0.5% in May. Analysts’ average estimates in a Bloomberg poll spoke of a small increase of 0.1% in retail sales, with a rise of 0.7% without vehicles.

Manufacturing activity in New York improved in June, but remained weak, according to data released today by the New York Fed.

Meanwhile, the Empire State Index for business conditions in the manufacturing sector gained 10.4 points, but remained negative, as in May it had fallen to -11.6%. Specifically, the index stood at -1.2 in June, a measure that indicates a deterioration in business conditions.

Extraordinary ECB meeting

Meanwhile, today, the European Central Bank held an extraordinary meeting to discuss “current market conditions”, after which it announced that it intends to implement a flexible mechanism for reinvesting funds from the PEPP portfolio (the extraordinary program to maintain the functioning of the monetary policy transmission mechanism, which is a prerequisite for the ECB to be able to meet its mission of price stability.

In addition, the Board decided to instruct the relevant Eurosystem committees, together with the ECB’s services, to accelerate the completion of the design of a new anti-fragmentation instrument to be assessed by the Governing Council, in order to address the and the powerful countries of the North.