i_SVG Created with Sketch.

Capital Markets Elite Group is not a registered U.S. broker-dealer. It does not accept a U.S. Person as a client if that person was solicited by Capital Markets Elite Group. (The definition of “U.S. Person” is here.) Capital Markets Elite Group will rely on a certification from a potential customer that the potential customer either is not a U.S. Person or has not been solicited, directly or indirectly, by Capital Markets Elite Group and has not been induced by Capital Markets Elite Group to engage in securities transactions. In particular, they must certify that they were directed to this website by someone other than Capital Markets Elite Group. They must also certify that they understand that they will not be protected by U.S. laws, regulations and supervisory structures applicable to broker-dealers registered in the U.S. and they do not expect such protections to apply. You should give these certifications only if they are true. If you wish to proceed to the website knowing that, please click “Continue” below. Otherwise click “Leave Website”

Leave Website
  • Products
    Products

    Capital Markets Elite Group provides you with a range of online trading and investment products. Learn more about us and our tools to help build your portfolio.

  • Platforms
    Platforms

    View Capital Markets Elite Group’s suite of easy-to-use, powerful and high-tech online stock trading platforms to see which fits your trading needs best.

  • Pricing
    Pricing

    Each product and online trading platform offered by Capital Markets Elite Group has unique features and capabilities with no hidden costs.

  • Services
    Services

    Capital Markets Elite Group offers services in addition to our trading platforms to grow your portfolio and supply you with assistance where you need it most.

  • Company
    Company

    Capital Markets Elite Group is an online brokerage and independent asset management firm that's customer-focused and results-driven. Let us know how we can further support you.

Start Trading
Fed Raises Key Rate by 75 Basis

Fed Raises Key Rate by 75 Basis Points for the Third Time, Indicates a Fourth 0.75% Move

The U.S. Federal Open Market Committee (FOMC) raised its key policy rate by three-quarters of a percentage on September 21st to battle higher inflation. In its fifth interest rate hike since the start of the COVID pandemic, the Federal Reserve (the Fed) increased the Federal Funds Target rate to an upper bound of 3.25%. Short-term yields surged on the news, with the key 2-year Treasury yield rising by 10.5 basis points to just over 4%. The 10-year yield remained relatively flat, while the 30-year yield declined by 4 basis points to 3.5%.

In a sign of how quickly the inflation picture has shifted in the U.S., the current yearend target of the Fed Funds Rate of 4.4% is up 2.5 percentage points from the 1.9% projection from the central bank in March. Furthermore, the FOMC also updated its near-term forecast of interest rates in its “Dot Plot” report. That report now indicates that the FOMC may very well raise rates by a further 75 basis points in its next meeting, making this one of the steepest federal reserve tightening cycles in modern history.  

Chair Jerome Powell said during the press conference following the decision to hike rates that it would likely take more time for the financial conditions to tighten by the Fed’s plan. Financial conditions usually take longer to tighten and function at a lag. This transmission of policy into the real-world economy historically takes anywhere from three months to a year to happen.

The Chair also indicated that while he believes another large rate hike in the FOMC’s next meeting in November may be appropriate, the FOMC’s ultimate course of action would be data deterministic. That language is a slight change from the June meeting when the Chair broadcasted that there would be a large hike in July regardless of the incoming data. In the past few months, as inflation has heated up, explicit guidance on the size of the next move has become more common.

Powell also said that the battle against inflation would mean continued rate hikes from the central bank. Price pressures remain elevated across a broad range of products and services. Third, and probably most importantly from a markets perspective, when asked if market expectations for rate cuts in 2023 were realistic, the Chairman only said that it was too early to look so far ahead. Investors, who have come to expect sharply hawkish commentary from the Chairman lately, may have been surprised by the openness to the idea that a slowdown induced by rate hikes in 2022, may necessitate rate cuts as early as 2023.

The Fed also does not believe that the U.S. economy is currently in a recession but did point out that the path towards avoiding a recession while simultaneously tackling inflation was becoming narrower. Monetary policy is anchored in the theory that early increases in interest rates are critical to controlling inflation and inflation expectations, and delaying hikes make it harder to deal with the problem. The Chairman also noted that the Fed is keen to see the economy grow slower than it would otherwise to give supply chains time to recover. Historically, a slowing economy and a weaker job market are required in tandem to slow down the rate of inflation.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.