Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee February 1, 2023 in Washington, DC.
Kevin Dietsch | Getty Images News | Getty Images
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Federal Reserve officials show no sign of letting go of rate hikes.
- Minutes from the Federal Open Market Committee’s February meeting revealed that members believe “continued” increases in interest rates are needed. While most approved of a quarter-point hike, “a few” wanted to raise rates by 50 basis points. Speaking of what…
- St. Louis Federal Reserve Chairman James Bullard told CNBC he favors aggressively raising interest rates to quickly quell inflation. And by “aggressive,” Bullard means walking fast enough to hit 5.375% this summer.
- Nvidia exceeded profit and revenue expectations. For the current quarter, the chipmaker forecasts higher sales than Wall Street forecast, thanks to the boom in artificial intelligence. Shares of the company jumped 8.5% after hours.
- PRO Coinbase’s fourth-quarter results beat Wall Street estimates, and its shares are up 72% this year alone. But short seller Jim Chanos says he is still betting against the crypto exchange.
The Federal Reserve minutes didn’t tell us anything we didn’t already know. In summary: price increases are slowing, but inflation remains a concern above 2%. Interest rates must therefore continue to rise. February’s quarter-point hike met with unanimous approval, but a few members wanted rates to rise at a more aggressive pace.
Even though investors have heard these warnings before, markets have fallen. The Dow Jones Industrial Average lost 0.26% and the S&P 500 fell 0.16% – but the Nasdaq rose 0.13%, supported by a 12.5% jump in Palo Alto Networks. Still, the massive sell-off in the markets suggests that investors who had hoped for a dovish tone in the minutes were disappointed.
Moreover, there are some early signs that the Fed is becoming more and more aggressive in its fight against inflation. Admittedly, there has been “no effort within minutes to signal the possibility of returning to a 50 basis point upward pace”, in the words of Krishna Guha, head of global policy and central bank strategy at Evercore ISI. But remember that the meeting was held before the Fed had information on January’s exceptional labor situation, the higher-than-expected consumer price index and the rebound in retail sales.
So it might be safer to listen to more recent comments from Fed officials, such as Loretta Mester and Bullard, who both advocate a 50 basis point hike. Bullard even thinks that the American economy can stay in good shape despite the turbulence caused by higher interest rates. Despite the ferocity of the Fed, there are signs pointing to a no-landing scenario, which should reassure investors.
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