U.S. stock futures declined on Thursday following the Federal Reserve’s hawkish decision to increase interest rates by 50 basis points (bps). Fed chair Jerome Powell remarked that despite recent signs of inflation slowdown, the central bank does not yet have enough confidence to lower rates. This contradicted the widespread belief that a rate decline could be expected shortly.
Fed’s policy-setting committee projected that it would continue to raise rates to above 5% in 2023. Such rates have not been reached since the steep economic downturn near the end of 2007.
According to current projections, investors expect borrowing costs to peak at around 4.9% by May 2023. Should this estimate ring true, borrowing costs can be expected to fall to 4.4% near year-end.
Overseas central banks are expected to follow the example of the U.S. Federal Reserve, with both the Bank of England and the European Central Bank set to hike borrowing costs in their own jurisdictions by 50 bps.
Following the Federal Reserve’s latest policy decision, a wave of additional economic data is expected this week, including weekly jobless claims, retail sales data, and industrial production