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Nasdaq volatile after Fed’s 75 bps rate hike

The Fed hiked rates yet again, causing volatility in the markets.

The tech-heavy Nasdaq 100 index experienced some volatile trading but remained circa flat on the day shortly ahead of the US closing bell.

The federal funds rate, the policy rate set by the US Federal Reserve, was increased by 75 basis points to a range of 3-3.25% on Wednesday. This choice was consistent with what the market anticipated.

The Summary of Economic Projections, or “dot plot,” published by the US Federal Reserve on Wednesday showed that policymakers’ median expectation for the Fed’s policy rate by the end of 2023 is 4.6%, up from 3.8% in the previous dot plot.

“Fed officials’ median view of fed funds rate at end-2024 3.9% (prev 3.4%).”
“Fed officials’ median view of fed funds rate at end-2025 2.9%.”
“Fed officials’ median view of fed funds rate in longer run 2.5% (prev 2.5%).”

Key takeaways from policy statement:

“Fed is highly attentive to inflation risks, strongly committed to returning inflation to 2%.”
“Job gains have been robust, the unemployment rate has remained low.”
“Recent indicators point to modest growth in spending and production.”
“Inflation remains elevated, reflecting pandemic-related imbalances, higher food and energy prices, broader price pressures.”
“War in Ukraine creating additional upward pressure on inflation, weighing on global economic activity.”

“Higher interest rates, slower growth, and softening labor market are all painful for the public, but they are not as painful as failing to restore price stability. We want to act aggressively now and keep at it until we get inflation down.” Powell emphasized

The Nasdaq 100 plunged in the initial reaction but managed to stage a 300 USD rally as soon as Powell started his presser, despite a rather hawkish dot-plot and the reassuring commitment to fight inflation. However, shortly after, the index dropped to unchanged on the day.

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