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Markets calm despite Fed rates surprise

by LLB Editor
17th Jun 21 2:24 pm

The US Federal Reserve has proved a bit of an unreliable partner to the markets, promising not to raise rates too far or too fast and then suddenly announcing an acceleration in its plans on this front.

AJ Bell financial analyst Danni Hewson said: “For now investors seem to largely be taking these developments in their stride – perhaps reassured by Fed chair Jay Powell’s comments that the guidance for two interest rate hikes in 2023 should be taken with a ‘grain of salt’.

“After all, we’re still talking about something which might happen in two years’ time and plenty could change in the interim, plus the reason rate rises are moving up the agenda is an improving economic outlook, so there is positive news here too.

“However, it is a reminder that investors will eventually have to confront the reality that the current ultra-loose monetary policy won’t last forever and there were signs of volatility in the bond market off the back of the Fed’s announcement with the dollar also rising to multi-month highs.”

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