U.S. stock indexes rose on Wednesday ahead of a widely expected hefty rate hike from the Federal Reserve, with investors waiting for cues on the length and depth of further policy tightening to tame surging price pressures.
Later in the day, the U.S. central bank will likely lift its policy rate by 75 basis points for the third time to a 3.00-3.25% range at the end of its two-day policy meeting, which will be followed by Fed Chair Jerome Powell's news conference.Updated economic projections from policymakers will be in focus, as investors would like to gauge where interest rates are headed, how long it would take inflation to fall and the pain rising prices are inflicting on the U.S. economy.
"The Fed has to thread the needle and basically reassure the market that they are going to be vigilant in fighting inflation, but once they feel they have the upper hand against inflation, they will back off," said David Sadkin, president at Bel Air Investment Advisors.Markets are pricing in a 21% chance of a 100 bps rate increase later in the day and seeing a terminal rate at 4.54% in March 2023.
"If drop on disappointing Fed, no one should be surprised if we test those June ," said David Wagner, portfolio manager at Aptus Capital Advisors in Cincinnati, Ohio. As interest rates continue to creep up, pressuring stock valuations, Wagner recommends having a portfolio tilted toward value stocks.
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