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Federal Reserve officials show no sign of pivoting away from rate hikes.
What you need to know today
- Minutes from the Federal Open Market Committee's February meeting revealed that members believe "ongoing" interest rate increases are necessary. While most approved a quarter-point hike, a "few" wanted to increase rates by 50 basis points. Speaking of which…
- St. Louis Federal Reserve President James Bullard told CNBC that he favors an aggressive interest rate hikes to quash inflation quickly. And by "aggressive," Bullard means hiking fast enough to reach a 5.375% rate this summer.
- U.S. stocks ended Wednesday lower, though the Nasdaq Composite eked out a 0.13% increase. European markets fell too. The pan-European Stoxx 600 index closed 0.3% lower.
- Nvidia beat earnings and revenue expectations. For the current quarter, the chipmaker forecast higher sales than Wall Street expected, thanks to the artificial intelligence boom. The company's shares popped 8.5% after hours.
- PRO Coinbase's fourth-quarter results beat Wall Street's estimates, and its shares are up 72% this year alone. But short seller Jim Chanos says he's still betting against the crypto exchange.
The bottom line
The Federal Reserve's minutes didn't tell us anything we didn't already know. To summarize: Price increases are slowing, but inflation is still worryingly above 2%. Hence, interest rates need to continue rising. February's quarter-point hike received unanimous support, but a few members wanted rates to increase at a more aggressive pace.
Even though investors have heard those warnings before, markets fell. The Dow Jones Industrial Average lost 0.26% and the S&P 500 dropped 0.16% — but the Nasdaq rose 0.13%, buoyed by a 12.5% jump in Palo Alto Networks. Still, the larger sell-off in markets suggests that investors hoping for a dovish tone in the minutes were disappointed.
Moreover, there are warning signs that the Fed is growing increasingly aggressive in its fight against inflation. It's true that there was "no effort in the minutes to flag the possibility of stepping back up to a 50bp pace of hikes," in the words of Krishna Guha, head of global policy and central bank strategy at Evercore ISI. But recall that the meeting was held before the Fed had information about January's out-of-this-world labor picture, the higher-than-expected consumer price index reading and rebounding retail sales.
It might be more prudent, then, to listen to fresher comments by Fed officials, such as Loretta Mester and Bullard, who both advocate for a 50-basis points hike. Bullard even thinks the U.S. economy can remain aloft despite the turbulence caused by higher interest rates. Despite Fed hawkishness, signs point to a no-landing scenario, which should give investors some comfort.
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