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Wall Street at ‘war’ with central bank

CommSec comments on the feud with the Fed.

Jack Derwin

Digital Journalist, Your Money

US equities have swung wildly overnight, reacting to the decision by the nation’s central bank, the US Federal Reserve, to hike interest rates.

The Dow Jones closed 1.49 per cent lower while the Nasdaq and S&P 500 sunk 2.17 per cent and 1.54 per cent respectively.

While the US Fed was largely expected to raise interest rates, its 2019 forecast was not welcomed by the market, according to CommSec’s chief economist.

Federal Reserve Chairman Jerome Powell appears on a television on the floor of the New York Stock Exchange, Wednesday, March 21, 2018. (AAP/AP Photo/Richard Drew)

“There was a bit of a tantrum in the United States, the investors didn’t get what they wanted. They only wanted one further interest rate hike to be forecast for 2019 [but] what they did get from the Federal Reserve is the possibility of two,” Craig James told Trading Day.

The slump on Wall Street is the latest development in the ongoing tension between America’s central bank and investors. 

“At the moment the Federal Reserve is basically at war with the markets. The market believes the Fed is going too hard and could possibly make a policy mistake,” James explained.

However, investor fears may be overblown with the Fed mandated to constantly update their view based on US economic conditions.

“This is not on a predetermined path. They’re going to look at the economic data and if it doesn’t justify it, [and] if inflation remains low, then they’ll stay on the sidelines,” James said.

Watch the full analysis above.

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