🔍
Fed announces largest interest rate hike since 1994 — what that means for you - YouTube
Channel: unknown
[5]
and there you have it the sound of the
[7]
closing bell at the new york stock
[9]
exchange right now the dow jones spent
[12]
most of the day
[13]
in the green it did
[15]
following federal reserve chair jerome
[17]
powell announcing the fed's largest
[19]
interest rate hike in nearly three
[21]
decades but as you see here it ended up
[24]
above 300 points that's right the nasdaq
[27]
and s p 500 both had similar days with
[30]
significant rebounds following the fed's
[33]
announcement the s p closed the day up
[35]
around one and a half percent the tech
[38]
heavy nasdaq is up more than two and a
[40]
half percent joining us now for more on
[43]
this is matthew lizzetti he is a senior
[46]
economist at deutsche bank matthew
[48]
welcome thanks very much for being with
[50]
us so how is the fed's interest rate
[52]
hike impacting the market today
[56]
sure first thanks so much for having me
[57]
uh as you noted the market actually took
[59]
uh the first uh 75 basis point rate
[62]
increase since 1994 rather well today uh
[65]
rallying on on the back of it and i
[67]
think in part it's a result of a few
[69]
things uh one chair powell in his press
[71]
conference noted uh the possibility that
[73]
the fed may not raise rates again by 75
[75]
basis points at the july meeting he
[77]
noted that the decision at that point
[79]
will likely be between 50 and 75 basis
[81]
points and i think more broadly the fed
[84]
despite raising rates significantly
[87]
has maintained a pretty optimistic
[88]
outlook they have growth slowing
[89]
materially but the unemployment rate
[91]
only rising to about four or four point
[93]
one percent by 2024 so they continue to
[96]
expect a soft landing uh and do and
[99]
continue to not have a recession over
[100]
the next several years and i think the
[102]
market is responding uh positively
[104]
positively to that and it seems the
[106]
market perhaps factored in that this
[107]
decision was coming and that it seems
[110]
pleased with at least the delivery of
[112]
the messaging how does though raising
[114]
the interest rate three-quarters of a
[115]
percentage point help tame inflation or
[119]
at least help the fed do so
[122]
yeah so certainly getting this event
[123]
risk out of the way i think is always
[125]
positive from the market's perspective
[127]
the fed raising rates as aggressively as
[129]
they are is all about inflation uh chair
[131]
powell explained that prior to last
[133]
friday's uh inflation data both the cpi
[136]
and the university of michigan inflation
[138]
expectations the fed had anticipated
[140]
raising rates by 50 basis points but
[142]
after that data came in uh much more
[144]
strongly they decided on a larger rate
[146]
increase
[147]
ultimately i think what we've seen in
[148]
the inflation data is it previously was
[150]
about supply constraints and goods items
[154]
but it's been much more about uh
[155]
services items recently and it's much
[157]
been much more demand driven so monetary
[159]
policy does play an important role here
[161]
by raising borrowing costs likely
[163]
reducing demand and goods and services
[165]
and that will hopefully be able to tame
[167]
inflation pressures over time so what
[169]
does this mean then for americans i mean
[171]
what kind of difference might they see
[173]
you know in their day-to-day lives at
[175]
the grocery store at gas pumps um will
[178]
they see any changes
[181]
sure so i think the number one thing on
[182]
people's minds has been inflation
[185]
and today's interest rate increase
[187]
probably doesn't have much of an impact
[188]
on inflation in the near term so we are
[190]
unlikely i think to see gas and oil
[192]
prices fall materially or food prices
[194]
fall materially in the near term as a
[196]
result of today's interest rate increase
[198]
beyond that i think a lot of what we've
[200]
seen from the fed has already been
[201]
reflected in markets so coming into
[203]
today we already saw a six percent
[205]
mortgage rate in the u.s so housing
[207]
costs have already risen substantially
[209]
uh beyond that it will be about what
[210]
happens in equity markets going forward
[212]
i think ultimately what we heard from
[214]
the fed is they need what we call
[215]
tighter financial conditions so they
[217]
probably need equities to be lower they
[218]
need interest rates to be higher and so
[221]
looking ahead that will mean i think
[222]
probably more volatility in markets
[225]
but also tighter financial conditions
[227]
with equities uh having trouble finding
[229]
footing uh and interest rates likely to
[231]
happen to move even higher so borrowing
[233]
costs for households moving higher so
[235]
your single phrase summary for how
[237]
markets did today would be
[241]
positive given getting beyond the event
[243]
risk i think we'll have to see how long
[246]
this has lived whether or not we get
[248]
good or bad inflation data going forward
[250]
our baseline is we will get more hot
[252]
inflation data the fed will have to
[254]
raise rates by 75 basis points again in
[256]
july
[257]
and ultimately they're going to have to
[258]
be more aggressive than they should
[259]
today over the coming months but
[261]
inflation will be the determining factor
[262]
there positive news for now we will take
[265]
it matthew lucetti thank you so much
[267]
with a gorgeous view of central park
[269]
behind you
[271]
thank you
Most Recent Videos:
You can go back to the homepage right here: Homepage