How did the market respond to the Fed’s announcement of a historic rate hike?

Quqas
2 min readJun 16, 2022

6/16/2022 12:47:13 PM GMT

  • The Federal Reserve boosted interest rates by 0.075 percentage points on Wednesday.
  • The Wednesday rate increase was the highest since 1994.
  • The rate increase had a mixed effect on various commodities, currencies, and index prices.

The Federal Reserve spiked interest rates by 0.75 at its Wednesday meeting. The spike was the biggest rate hike since 1994, as another step from the Fed in to combat high inflation in the US, which is running at 40 years high.

The rate hike from the Fed is a step to raise the cost of borrowing and reduce liquidity in the economy, which will help slow down inflation.

Consequently, it will decrease purchasing power and tighten the gap between demand and supply in most economic sectors.

The varieties of commodities, currencies, and indexes responded differently to the interest rate rise. The first price action for gold and several currencies was timid, followed by a price comeback, and the S&P 500 index has been in full collapse. The sp500 was trading at 3,706.1 at press time, down -2.22 percent for the day.

However, the DXY also ends Wednesday in the red territory, knowing that the rate hike increased the demand for the currency. Meanwhile, traders would not see the direct effects on the market, as we have witnessed in the past. The market would…

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Quqas

Financial writer and Financial market analyst