In its February 1, 2023 press release, the Federal Open Market Committee (FOMC) recognized that inflation has eased. With the goal of getting inflation to 2%, the FOMC announced the federal funds rate will be raised from 4.50% to 4.75%. The magnitude of the increase is what Wall St. expected and the news was positively received. In a press conference, Powell acknowledged that disinflation may have started. At some point the rate hikes will stop. That point could be with interest at 5%. Then as inflation begins to fall further, the interest rates can be reduced. The factors that have cause the inflation include COVID supply chain disruptions and the war in Ukraine. COVID has been easing and will help reduce inflation. The war in Ukraine enters its second year and unfortunately is still raging.
The FOMC announcement was 2 pm EST and market reaction was positive. Nasdaq finished at 11,816.32, +231.77, +2.00% , S&P 500 was 4,119.21, +42.61, +1.05% DOW at 34,092.96, +6.92, +.02%.