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Wednesday, May 4, 2022
In the face of rising inflation, the Federal Reserve seems ready to do something it hasn’t done in two decades: apply a huge rate hike.
Scroll back to May 2000, when things were very different (ie Razor Scooters rushed in and * NSYNC topped the Billboard charts). But as of today, there have been fears of higher inflation in the future.
In the face of “inflationary imbalances”, the Fed, led by Alan Greenspan, raised interest rates by 0.50% to a target of 6.5%. This would be the last time the Fed would raise interest rates by as much in one go, instead choosing a 0.25% increase at once.
Fed Chairman Jerome Powell and his colleagues are likely to break this spell at the end of today’s meeting. Powell said on April 21 that an extraordinary interest rate increase of 0.50% “will be on the table.”
San Francisco Fed President Mary Dalley has suggested that more aggressive moves will be on the table for future meetings.
“We will probably get an increase of 50 basis points in several of the meetings,” she told Yahoo Finance on April 21.
Despite the historical significance of the 0.50% move, some say more will be needed to win the battle against the rapid pace of price increases. While measurements of inflation (personal consumption expenditure) show that prices have risen by 2.4% annually in May 2000, price increases are now at almost 7%.
The president of the Fed in St. Louis, James Bullard, for example, suggested that the idea be made even bigger: a 0.75% move.
Markets do not expect this giant leap in today’s meeting. Fed futures, the Fed’s move betting market, were valued at a 99% chance of moving from 0.50% on Tuesday afternoon.
Along with any interest rate movements, the Fed is also expected to announce a strategy to eliminate the trillions of asset purchases it has made since the beginning of the pandemic. Until March, the Fed took over US government bonds and mortgage-backed securities to announce its support for the financial markets.
The story continues
Preliminary discussions in March outlined a rough plan to shrink its balance of nearly $ 9 trillion, detailing a strategy to settle up to $ 95 billion a month in maturing assets.
The Fed’s decision must be made at 14:00 ET. Powell’s press conference, the first to be held in person since the pandemic, will begin at 2:30 p.m.
Today’s newsletter is by Brian Cheung, a presenter and reporter covering the Fed, economics and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
What to watch today
Economics
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7:00 AM ET: Mortgage MBA Application, week ended April 29 (-8.3% in the previous week)
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8:15 a.m. ET: ADP change in employment, April (385,000 expected, 455,000 in March)
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8:30 a.m. ET: Trade Balance, March (- $ 86.7 billion expected, – $ 89.2 billion in February)
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9:45 a.m. ET: S&P Global US Services PMI, April Final (54.7 in previous print)
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9:45 a.m. ET: S&P Global US Composite PMI, April Final (55.1 in previous print)
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14:00 ET: FOMC monetary policy decision
Profit
Preliminary market
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6:30 a.m. ET: AmerisourceBergen (ABC) is expected to report adjusted earnings of $ 2.93 per share on revenue of $ 57.28 billion
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6:30 a.m. ET: CVS Health (CVS) is expected to report adjusted earnings of $ 2.15 per share on revenue of $ 75.39 billion
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7:00 a.m. ET: Marriott International (MAR) is expected to report adjusted earnings of 92 cents per share on revenue of $ 4.17 billion
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7:00 AM ET: Mmm! Brands (YUM) is expected to report adjusted earnings of $ 1.08 per share on revenue of $ 1.60 billion
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7:30 a.m. ET: Vulcan Materials Co. (VMC) is expected to report adjusted earnings of 62 cents per share on revenue of $ 1.43 billion
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7:30 a.m. ET: Sinclair Broadcast Group (SBGI) is expected to report adjusted losses of $ 1.21 per share on earnings of $ 1.53. billion
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7:30 a.m. ET: WINGstop (WING) is expected to report adjusted earnings of 36 cents per share on revenue of $ 86.22 million
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Before the market opens: Moderna (MRNA) is expected to report adjusted earnings of $ 4.98 per share on revenue of $ 4.71 billion
Post-market
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16:00 ET: Booking Holdings (BKNG) is expected to report adjusted earnings of 71 cents per share on revenue of $ 2.54 billion
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16:05 ET: GoDaddy (GDDY) is expected to report adjusted earnings of 43 cents per share on earnings of $ 989.92 million
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16:05 ET: Uber (UBER) is expected to report adjusted losses of 18 cents per share on revenue of 6.13 billion dollars
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16:05 ET: Twilio (TWLO) is expected to report adjusted losses of 22 cents per share on revenue of 863.93 million dollars
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16:05 ET: Etsy (ETSY) is expected to report adjusted earnings of 72 cents per share on revenue of $ 575.59 million
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4:05 PM ET: TripAdvisor (TRIP) is expected to report adjusted losses of 8 cents per share on revenue of $ 250.00 million
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16:15 ET: Marathon Oil (MRO) is expected to report adjusted earnings of 97 cents per share on revenue of $ 1.85 billion
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After market closure: Spirit Airlines (SAVE) is expected to report adjusted losses of $ 1.57 per share on revenue of $ 957.50 million
Yahoo Finance Highlights
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