Fed raises rates to 22-year high

In the aftermath of the Federal Reserve's recent decision, the dollar experienced a decline. Meanwhile, hedges against the risk of a stronger yen reached a three-year high as market participants speculated about potetntial tweaks to the Bank of Japan's policy. On the Asian front, shares gained ground, with a notable 20% increase in a gauge of China tech stocks compared to the May low. In the international markets, US and European futures showed a positive trend. Additionally, Treasuries and Brent registered gains.

Meta, the parent company of social media giant Facebook, saw a significant postmarket surge of nearly 7%. This boost came after the company's sales beat expectations, signaling its successful migration of advertisers to its Reels platform, which serves as a competitor to the popular TikTok service.

Federal Reserve raises interest rates in line with market expectations

In the latest development, the Federal Reserve has raised the target range for the federal funds rate by 25 basis points, bringing it to 5.25%-5.5% in July 2023. This move aligns with market expectations and marks the highest borrowing costs since January 2001. The central bank has expressed its commitment to closely monitor incoming information and assess its implications on the economic outlook. Should any risks emerge that could hinder the achievement of inflation and employment goals, the Fed is prepared to adjust its monetary policy stance accordingly. Policymakers will continue to consider a wide range of factors, including labor market conditions, inflation pressures and expectations, as well as financial and international developments. The tightening campaign, which had been paused in June, has now resumed, with the Fed acknowledging the economy's moderate expansion, robust job gains in recent months, low unemployment rates, and persistently elevated inflation.

European Central Bank (ECB) set to raise rates

Meanwhile, the European Central Bank (ECB) is preparing to raise rates by 25 basis points. Investors are closely observing any clues or hints regarding the potential outcome of the next meeting in September. Speculation has increased about whether this current move will be the last in the cycle, as traditionally hawkish ECB officials have cast doubt on the possibility of a further increase. To maintain maximum flexibility, policymakers are being cautious not to send overly decisive signals in either direction.

Second-quarter GDP growth expected to cool

Looking ahead, expectations suggest that second-quarter GDP growth will likely cool down to 1.8% year on year, compared to the previous period's 2%. This slowdown is attributed to weaker demand amid tighter monetary policy, which is expected to weigh on overall growth and factory production. Durable goods are projected to rise by 1.3%, while jobless claims may experience a slight uptick.