Live updates on FOMC meeting, stocks

Will the Federal Reserve continue to hike interest rates as the banking industry walks on eggshells after the implosion of Silicon Valley Bank and Signature Bank earlier this month?

The anticipation is killing Fed watchers and investors alike.

Today we’ll finally get an answer.

Before the recent bank failures, some economists and policymakers had been calling on the Fed to stop hiking interest rates over fears it could cause a recession. Even with signs that the U.S. economy was cooling off and that soaring prices were slowing, Fed officials, including Chair Jerome Powell, signaled the central bank would likely raise interest rates by as much as a 50 basis point at its March meeting to continue curbing stubborn inflation.

Will the Fed hike interest rates?:4 reasons Fed will raise rates again amid SVB crisis, 4 reasons it won’t

Protect your assets: Best high-yield savings accounts of 2023

2023 banking crisis:Close to 190 banks could face Silicon Valley Bank’s fate, according to a new study

But after the recent bank failures, economists at Goldman Sachs said they didn’t expect the Fed to raise rates in March over concerns that it would put undue stress on banks.

However, if the Fed doesn’t change rates, it could risk losing the fight against inflation, which rose sharply on a monthly basis in January and February. The annual inflation rate remains is three times the Fed’s 2% target.

Follow along for live updates leading up to the Fed’s crucial decision today:

What time is the Federal Reserve announcement today?

If the Fed raises interest rates it will announce it at 2 p.m. ET today.

When is Powell speaking?

Powell will hold a press conference at 2:30 p.m. ET.

Stock market today

Stocks were mixed ahead of the Fed’s decision on interest rates. The Dow Jones Industrial Average was down around 0.1% as of 11:37 a.m. ET. While the S&P 500 and Nasdaq Composite were slightly higher.

Housing market and rates:Housing market is ‘overly sensitive’ to Fed rate hikes. Experts weigh in on what’s next.

How retirees can cope with a bad market: Recovering from crushing inflation, rate hikes and bank failures

First Republic Bank (FRC) stock

Shares of First Republic Bank are volatile pivoting between gains and losses. As of 11:38 a.m. ET shares were down by nearly 3%. Late Tuesday night The Wall Street Journal reported that the troubled regional bank tapped Lazard, a financial advisory group, to help it review strategic options that could include a sale according to people familiar with the matter.

This comes a week after First Republic received a $30 billion capital infusion for major U.S. banks including Bank of America, Citi and JPMorgan.

Odds of a Fed rate hike

The consensus is that the Fed will hike interest rates by 25 basis points.

As of around 10 a.m. ET on Wednesday, there was an 86% chance of that happening, according to the Chicago Mercantile Exchange’s FedWatch Tool, which uses future Fed funds futures contracts to inform rate decision forecasts.

Meanwhile, there was around a 14% chance the Fed will hold rates steady, a slight increase from yesterday.

Before the banking crisis unfolded, those odds looked quite different. There was a 24% chance the Fed would hike by 50 basis points and a 76% chance of a 25 basis point hike and a 0% chance of a pause.

Fed meeting notes

Several weeks after every Fed meeting, the central bank releases what’s known as the minutes. The minutes provide more details on what led voting members of the Fed to their decision on interest rates and summary what they discussed over the course of their two-day meeting. Sometimes the minutes even hint at what the Fed’s move will be at its next meeting.

You can read the last meeting’s minutes here.

Minutes from the March meeting will be released on April 12 at 2 p.m. ET.

2-year Treasury yield

Yields on 2-year Treasury notes are up Wednesday morning. As of 11:39 a.m. ET they hovered above 4.2%. At the onset of the banking crisis around two weeks ago, yields shot up to 5%. The last time 2-year yields were at that level was 2007.

Yields on short-term Treasury notes tend to rise when investors anticipate the Fed will hike interest rates.

Bitcoin price

Even though the banking crisis has roiled the stock market, Bitcoin has performed especially well. It’s up more than 16% for the month as of Wednesday morning and was trading at over $28,000.

Fed dot plot

Included in the Fed’s Summary of Economic Projections report, which is set to be released at 2 p.m. today, is what’s known as the Fed’s dot plot.

The dot plot is a visual representation of where individual Fed officials predict interest rates will be in the coming years and in the long run. The dot plot was invented in late 2011 and was intended to add a new layer of transparency to the Fed’s monetary policy decisions.

In the most recent dot plot, which was released in December, the majority of Fed officials at the time indicated a target Fed funds rate between 5% to 5.25% would be appropriate.

Why did SVB collapse?

Silicon Valley Banks’ customers, who were largely startups and other tech-centric companies, started becoming needier for cash over the past year. That led them to withdraw money from their accounts.

SVB meanwhile needed to keep selling its assets, mainly U.S. Treasuries, at a loss to free up capital so that customers could withdraw funds. Normally, this is considered a safe long-term investment, but the Fed’s interest rate hikes made the value of the Treasuries tumble.

SVB collapse:What does the Silicon Valley Bank collapse mean for the economy? Experts expect modest dip.

SVB got to a point where the losses were so high, customers began to fear SVB couldn’t guarantee access to every customer’s funds. That fueled a massive bank run which caused the Federal Deposit Insurance Corporation to step in.

ECB rate decision

The banking crisis didn’t deter the European Central Bank from hiking interest rates by 50 basis points at its meeting last week.

Even as Credit Suisse was struggling to raise capital to shore up liquidity, markets generally were unphased by the ECB decision.

“The fact that markets did not react negatively” to the move “will also provide a measure of reassurance” to the Fed, Barclays economists said.

Fed rate hike history

At the Fed’s last meeting, which was held between January 31 and February 1, interest rates were bumped up 0.25 percentage point.

Interest rates were hiked seven times last year. Rates had been hovering near zero during the pandemic’s economic standstill and then were raised by 0.25 percentage point starting in March.

Another increase came in May, this time by 0.50 percentage point, followed by 0.75 percentage point hikes for four consecutive meetings. The Fed ended the year with a 0.50 percentage point hike.

Banks at risk of failure

On the heels of Silicon Valley Bank’s collapse earlier this month, 186 more banks are at risk of failure even if only half of their depositors decide to withdraw their funds, a new study has found.

That is because the Federal Reserve’s aggressive interest rate hikes to tamp down inflation have eroded the value of bank assets such as government bonds and mortgage-backed securities.

Fed report today

In addition to the Fed’s announcement on interest rates at 2 p.m., the central bank is set to release its quarterly Summary of Economic Projections. The report gives an overview of how Fed officials think the economy will fare in the next couple of years based on their projections for gross domestic product, the unemployment rate and inflation and where they believe interest rates will be.

But there’s a chance the Fed may delay releasing the report today because of all uncertainty stemming from the recent bank failures. The last time the Fed delayed the SEP report was in March 2020 at the onset of the pandemic.

Mortgage rates today

At the beginning of the month, the average annual percentage rate (APR) for a 30-year fixed mortgage is 6.77%. This is more than double the 3.22% rate we saw at the beginning of 2022 and up from 6.55% the week prior.

Mortgage rates and the Fed:Housing market is ‘overly sensitive’ to Fed rate hikes. Experts weigh in on what’s next.

Current mortgage rates details:How to shop for mortgage rates, more

Polkadot Price Likely to Crash xx% Despite Recent Protocol Upgrade

30 July 2024

Here’s Why UNI and Polkadot (DOT) Holders Are Flocking To Rollblock

28 July 2024

What will Powell say after the interest rate annoucement

It’s anyone’s guess what Powell will tell reporters at his press conference following the rate decision announcement.

[crypto-donation-box]

Economists at Deutsche Bank, who predict the Fed will raise rates by a quarter percentage point, think Powell will use his time at the mic to “emphasize the heightened uncertainty about the outlook given recent events.”

“He will also reinforce that the banking system remains sound and the Fed stands ready to provide liquidity as needed,” Deutsche Bank economists said in a note to clients earlier this week.

JPMorgan economists also believe the Fed will hike rates by a quarter point. They predict he will spend a considerable amount of time during his press conference walking reporters through the Fed’s plan to lower inflation, in addition to addressing the current state of banking.

How many banks have failed in 2023?

Two FDIC-insured banks, Silicon Valley Bank and Signature Bank, have failed this year. The FDIC took over both banks and vowed to make all depositors whole even if their account balances exceeded its traditional $250,000 insurance cap.

I bond interest rate

I bonds, inflation-protected U.S. Treasuries, issued from November through April have a composite interest rate of 6.89%.

Can I purchase I bonds with refund?:What to know about rates, deadline, restrictions

The case for I bonds:Why I doubled down on I bonds to protect my sons’ inheritance from inflation

Current Fed funds rate

The Fed is currently targeting an interest rate range between 4.5% to 4.75%.

Fed meeting calendar

The Fed’s next meeting is May 2-3. Here’s a schedule of the remaining meetings for the year:

June 13-14
July 25-26
September 19-20
Oct/Nov 31-1
December 12-13

When does the Fed meet to talk rates?The Federal Reserve’s 2023 schedule

Fed meeting agenda:Here’s what to know and when to expect a rate change.

Powell talks inflation:Fed chair testifies before Senate on inflation, speeding up rate hikes

When is the next Fed interest rate decision?

The next Fed interest rate decision will come out on May 3.

Contributing: Paul Davidson, Swapna Venugopal Ramaswamy, Anna Kaufman

Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here

Credit: Source link