US stocks fell, after Fed Chairman Jerome Powell hinted at two possible rate hikes in 2023. S&P 500 posted its largest decline, dropping by more than 0.5%. Meanwhile, dollar rose against other world currencies.
10-year Treasury yields also rose from nearly three-month lows, while 5-year and 7-year bonds fell further.
The yields jumped after Fed officials said they will soon ease the programs they implemented to support the economy during the COVID-19 pandemic.
Michael Contopoulos, director at Richard Bernstein Advisors, said the decision is clearly hawkish, and supports the idea of reflation.
But for now, rates will remain at 0%-0.25%, where it has been since March 2020. Bond purchases will also remain at $ 120 billion a month, until US sees significant progress in employment and inflation.
In the press conference, Powell revealed that 13 officials favored at least one rate hike in 2023, while 11 said there will be 2 rate hikes. Meanwhile, 7 said rates may increase as early as 2022.
Ryan Detrick, chief market strategist at LPL Financial said the announcement should not be surprising.
Other key events for this week are:
- report on Federal budget (Thursday);
- policy meeting of Swiss National Bank and Norges Bank (Thursday);
- policy meeting of Bank of Japan (Friday)
