Interest rates are often raised to combat increasing inflation, but higher rates can cause stocks to move lower by making it more difficult for companies to access cash. However, data shows that stocks can respond positively to interest rate hikes after the initial reaction lower. Frank describes the economic cycle around interest rates, reports where the US economy currently stands, and projects where stocks could be headed if the Fed continues to raise interest rates. With a Fed meeting upcoming, you can learn the correlations between stocks and interest rate activity.
The probability of a rate hike at the May Fed meeting is more than 80% the day before the FOMC meets. The odds, however, are shifting as fear surrounding the banking crisis and the debt ceiling continues to rise. Check out the chances of interest rate hikes for the rest of 2023, and find out how they've been evolving in recent weeks.
Finally, the Reserve Bank of Australia surprised traders and analysts with an unexpected rate hike of 15 basis points at their May meeting. This news caused the Australian dollar to rally more than 100 pips against the US dollar before paring gains.
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