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Federal Reserve Hikes 25 Basis Points, Maintains 2023 Rate Forecast at December Levels

In today’s decision, the Federal Reserve’s rate-setting committee raised benchmark rates by a quarter percentage point and hinted at further tightening to come – but policymakers also suggested that the economic impact of recent regional bank collapses remained largely unknowable. At the conclusion of its two-day meeting in Washington, the Federal Open Market Committee unanimously voted to raise the target range for the federal funds rate to 4.75-to-5.00 percent, with no dissents in favour of a smaller or larger move. This brings US rates back to levels last reached in September 2007. In the official statement setting out the decision,...

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All eyes on the US Fed

• Positive vibes. Equities and bond yields are higher as sentiment regarding the banking situation continues to improve.• US Fed in focus. While a case can be made for the Fed to hold steady, we think it is more likely that it delivers another 25bp hike. And continues to stress that ‘restrictive’ settings will be needed for some time.• AUD underperformer. Comments that the RBA will “reconsider” a pause in April have weighed on the AUD. Policy divergence can keep the AUD on the backfoot. Risk sentiment has continued to recover. The recent moves by authorities to support the banking...

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Chartbook: March 21

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Markets Move Higher as Anxiety Subsides

A relief rally continues to unfold in global financial markets this morning, with equity indices and bond yields marching higher as tensions in the US and European banking sectors show signs of easing. The dollar is turning in a mixed performance as safe haven currencies retreat. In prepared comments released ahead of a speech this morning, US Treasury Secretary Janet Yellen said the protections extended to uninsured depositors at Silicon Valley Bank could see use elsewhere. “Our intervention was necessary to protect the broader US banking system,” she said, “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the...

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Calm before the Fed storm?

• Intra-day vol. Equity and bond markets have whipped around over the past 24hrs in response to the UBS/Credit Suisse deal. In the end risk appetite improved.• Fed in focus. Measures deployed to suppress contagion risks should keep the door open for the Fed to hike rates again in its fight against inflation.• AUD near a 2-week high. Positive risk sentiment can support the AUD further near-term, but the Fed decision could see it fall back later this week. Markets continue to experience intra-day volatility, with global banking developments still centerstage. The news that UBS is buying Credit Suisse was...

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