The Covid era of free money is over.
After the Fed's historic rate hike Wednesday, Americans will start to see higher borrowing costs.
On the plus side, cash sitting in bank accounts will finally earn something (albeit not much).
US markets rallied sharply on Wednesday, posting their best day in two years, after the Federal Reserve Chair Jerome Powell announced a half-point rate hike but assured investors that even bigger rate hikes are "not something the [Fed] is actively considering."
Powell also used his press conference to repeatedly reassure Americans of his confidence in the US economy and to deflate rampant recessionary fears.
Markets had been relatively flat this week as investors held their breath ahead of the FOMC announcement, their collective sigh of relief appears to have finally lifted stocks into the green.
The rate hikes and subsequent market lift follow a very bad April, where US markets had their worst month in years.
The Dow closed 932 higher, rising 2.8%. That was the index's best day since November 9, 2020.
The S&P 500 was up by 3%. That was the stock market's best performance since May 18, 2020.
The Nasdaq grew by 3.2%, it's best day since February 24, 2022.
Sen. Joe Manchin acknowledged that voters’ perceptions of the economy are dropping and argued that inflation — not abortion — will be the driving force in the midterm election, even as his own party is rallying against the leaked Supreme Court draft suggesting Roe v. Wade will be overturned as a defining issue.
“Inflation is the number one driving factor … I believe in my state right now it’s hurting everybody,” Manchin told CNN. He added that voters are more concerned about their pocketbooks than anything else.
“Follow the money,” Manchin said.
Manchin, who opposes abortion rights, told CNN he was studying how Brett Kavanaugh represented himself on the issue when the two met in 2018. Manchin was the lone Senate Democrat who voted for Kavanaugh.
“We are going back through all the things we have — we had meetings with him — to find out what he said and how it was actually presented to us. I had many conversations with him,” Manchin said.
Manchin said he didn’t know if Kavanaugh or Gorsuch lied to Congress. Yesterday he defended his vote for Kavanaugh in an interview with CNN.
Manchin did not rule out backing a narrower abortion rights bill now being discussed by Sens. Collins and Murkowski. “We are looking at everything,” he said.
US markets rallied sharply on Wednesday afternoon as the Federal Reserve Chair Jerome Powell announced a half-point rate hike but assured reporters that even bigger rate hikes are "not something the [Fed] is actively considering."
Markets had been relatively flat this week as investors held their breath ahead of the FOMC announcement, their collective sigh of relief appears to have finally lifted stocks into the green.
The Dow rose 903 points or 2.7% on Wednesday afternoon.
The S&P 500 was up by 2.8%.
The Nasdaq grew by 2.9%.
Federal Reserve Chairman Jerome Powell is typically considered humble but not self-deprecating. He gave a small sense of his humorous side Wednesday when he hinted at how the Fed underestimated the extent to which inflation would rise.
"If Congress or the administration has ways to help with inflation, I would encourage that, but I'm not going to get into making recommendations or anything like that," Powell said. "It is really not our role. We need to stay in our lane, and do our job. When we get inflation back under control, then maybe I can give other people advice."
Stocks rose sharply after Federal Reserve Chairman Jerome Powell said the Fed wasn't considering rate hikes any larger than Wednesday's half-point increase.
"A 75 basis point increase is not something the committee is actively considering," Powell said. "There is a broad sense on the committee that additional 50 basis increases should be on the table for the next couple meetings."
Investors were most pleased. The Dow surged 600 points, or 1.8%. The S&P 500 was up 1.8% and the Nasdaq rose 1.6%.
Once inflation is in check, the Fed will continue hiking rates -- but at more typical quarter-point levels, Powell said.
"It is not like we would stop," Powell said. "We would just go back to 25 basis point increases."
The Fed is purposefully trying to slow down the economy to keep inflation in check. But some economists worry the central bank was too late to the game and is now acting so quickly to catch up that it risks sending America's economy into a recession.
Federal Reserve Chairman Jerome Powell said it won't be easy, but the Fed thinks it could avoid that scenario.
That's because America currently has an historically high number of job openings. That suggests demand for new hires could fall, Powell said, before workers get laid off.
The labor market is super strong and nowhere close to a downturn. Also consumer spending is strong, and businesses are in good financial shape.
"In principle, it seems as though by moderating demand, we could see vacancies come down, and as a result, they could come down fairly significantly, and I think put supply and demand closer together than they are at least, and that would give us a chance to have lower, to get inflation, wages down, and get inflation down, without having to slow the economy and have a recession, and have unemployment rise materially," Powell said.
That gives the Fed a shot at a "soft or softish landing" -- i.e. no recession. But it's not certain.
"The economy is strong and is well-positioned to handle tighter monetary policy," Powell said. "But I'll say I do expect that this will be very challenging, it is not going to be easy."
Federal Reserve Chairman Jerome Powell started his press conference today by speaking directly to Americans hurt by surging prices.
"I'd like to take this opportunity to speak directly to the American people," Powell said. " Inflation is much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it back down. We have both the tools we need and resolve to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the last two years and proved resilient. It is essential we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all."
Federal Reserve Chairman Jerome Powell said the Fed isn't messing around with inflation. The central bank may have acted too slowly, many argue, but it is taking the threat seriously now and in the future.
Powell said half-point rate hikes like the one the Fed issued Wednesday could become the norm in the coming months.
"We are on a path to move our policy rate expeditiously to more normal levels," Powell said. "Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings."