The Chairman of the Federal Reserve presented the Federal Reserve's semi-annual Monetary Policy Report to the Committee, stating that the committee is committed to returning inflation to its 2% goal. The report states that the economy has slowed down while the labour market remains extremely tight. Inflation remains well above the Federal Open Market Committee's (FOMC) longer-run objective of 2%. The FOMC has tightened the stance of monetary policy over the past year, raising interest rates by 4.5 percentage points, and plans to continue doing so to attain a stance of monetary policy that will be restrictive enough to return inflation to 2% over time. The report also stated that the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.
EQUITY
Fed Chair Jerome Powell's comments to Congress sent the US stock market indexes plummeting on Tuesday. The fact that employment and consumption were strong should have been obvious. Traders raised bets for a 50-basis-point rate hike in March, with money market futures pricing in more than a 70% chance, leading investors to re-evaluate their risk-reward strategies in this new paradigm.
GOLD
Following the hawkish stance taken by the Fed, gold strapped its belt and braced for landing. The price fell by 1.8% on Tuesday and continued to decline on Wednesday, but has yet to break its previously established support at 1804.
OIL
Oil prices suffer all the same due to the Fed's comment, although US crude stockpiles fell by 3.835 million barrels, marking the first decline in 10 weeks. However, gasoline and distillate stockpiles both showed builds.
CURRENCY
The US dollar hit a three-month high due to a surge in Treasury yields following Fed Chair Jerome Powell's statement that interest rates may rise more than expected. Stronger-than-expected inflation and labour market readings have led to a potential terminal rate of 6%. The Beige Book report on the economy and nonfarm payrolls data for February will provide more cues for the currency, which is expected to continue showing strength.