All Eyes On Fed Interest Rate Hike Announcement
The stock market started jittery, but positive, Wednesday ahead of the anticipated announcement from the Federal Reserve (Fed) on the level of the next interest rate hike.
All three major indexes were trading in the green through late morning.
The Fed is expected to follow through with plans to raise the benchmark interest rate by 75 basis points. The announcement is expected this afternoon.
Everyone from consumers to the federal government are facing more debt with any level of higher interest rates.
Traders keep watch on Fed interest rate hike
Traders are also consumers and, whichever hat you’re wearing, there is a lot to deal with today and the coming weeks.
The looming catalyst in the trading world is the Fed interest rate hike announcement today. This could push the stock market and economy from bad to extremely bad with a few simple words.
While an expected .75% interest rate hike might be considered “baked into” the stock market, the ensuing market reaction may not be a rally higher. And a 100 basis point increase (a full 1%) could send the market into a shocking downward spiral.
No matter the market reaction, consumers face an ever-increasing weight of higher expenses and debt. One tidbit of news being overwhelmed by the Fed watch is that declining gasoline prices have stalled. A renewed rise in gasoline prices will hit consumers’ wallets directly.
Any Fed rate hike won’t suddenly eliminate the current inflation rate – more than 8% and a 40-year high – and the cost of debt (think credit cards or a new mortgage) may not be sustainable for many consumers. Credit card debt will increase on new purchases and even a .75% higher mortgage rate can push many buyers out of the market with a monthly payment outside their budget.
And, if anyone doesn’t fall into one of these two examples, all U.S. taxpayers fall under the umbrella of the $31 trillion federal government debt. Each Fed rate hike pushes interest rate payments ever higher for the U.S. government. This adds up to hundreds of millions to billions of dollars in debt payment increases annually as payments fall under the rising interest rates.
Traders waiting for the play of the day
What’s the play today for traders?
Watch and wait.
Simpler’s team is watching the market reaction to Fed interest rate hike announcement and maintaining limited trades based on shorter time frames. They’re waiting for confirmation of a direction after the Fed announcement. Then they will analyze any potential trades before jumping into the fray.
Traders don’t want to get caught on the wrong side of any wild market moves.