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Fed sounded hawkish, pointed towards the next rate hike



Well, Fed has decided to keep the rates unchanged this time but sounded quite hawkish for a further rate hike. Robust economy, strong employment numbers, and rising inflation are some of the reasons behind the tightened monetary policy, however, severe contraction can push away investors from the Equity market, some of which could be seen by a drop in all indexes post-Fed meeting, shedding all previous day gains. While people seem to be celebrating the widespread media dissemination of rising average wages, there isn’t much focus on real wages. Current average nominal monthly wage growth sits at 3.4% but taking an average monthly CPI of 2.4% into consideration, real growth comes down to mere 1% which is better than that of 2017 but still far behind the peak of (3.6%-1.9%) 1.7% in 2016.
Increasing inflation is an issue but in absence of any substantial increase in demand amid trade wars, political tensions in Europe and weak global cues, inflation doesn’t seem to go much beyond the current levels. Fed did sound hawkish in its recent meeting pointing towards the next rate hike, they may consider keeping it same in the next meeting too. 

 Author: Mohit Tuteja | MS Finance, University at Buffalo, State University of New York | Master of Management, University of Sydney | CFA Level 1 candidate

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