The FED raised interest rates. Franc exchange rate above PLN 5

FED at yesterday's meeting it raised US interest rates by 0,75 points. percent to the level of 3-3,25 percent But the whole day yesterday was very turbulent in the market. The upcoming rate hike and concerns about Russia's new actions towards Ukraine strengthened the dollar and weakened the euro and the zloty. The Swiss franc, this time for a longer period, exceeded the limit of PLN 5.

The fastest cycle of increases in 32 years

At the third meeting, the Fed raises rates, which means that we are dealing with the most aggressive rate-raising process in the US since 1980. The increase, as expected, amounted to 0,75 points. percent and has already been valued by the market. Currently, investors are more concerned about the final maximum level of increases and when this process will end.

As inflation is not falling as expected, the FED will probably be forced to raise rates more than previously forecasted (ending the cycle before Christmas at 4-4,25%). According to new forecasts, in order to achieve this, it may have to cause a more serious slowdown in economic growth. This means that the pain associated with foot increases may not end so quickly.

Soft landing still real?

The biggest dilemma of US economists and the Fed is that rate hikes will help fight inflation without hitting the US labor market too hard and unemployment rising significantly. It seems that the chance for such a "soft landing" still exists. Especially that the FED's economic forecasts have not deteriorated significantly recently. The market will continue to closely follow Powell's comments on the impact on the labor market and the global economy for guidance in building further scenarios.

The shock of the shift in the Fed's path and the uncertainty over inflation are two hard pills for markets to swallow. Yesterday S & P500 ended with a decline of 1,71 percent. and Nasdaq Composite by 1,79% As rates can remain high for longer, they will put a greater strain on the growth-oriented portion of the portfolios.

The exchange rate of the franc broke 5 zlotys

Yesterday also brought an announcement by Russia partial mobilizationwhich is to support the army fighting against Ukraine. Together with the expected rate hike, it created a mixture bringing a strong appreciation of the dollar. At the end of the day, one dollar was traded at 1,02 euros. The zloty weakened along with the euro - $ 1 cost a record PLN 4,85, and the euro PLN 4,77. The Swiss franc also appreciated, which once again, this time probably for longer, exceeded the limit of PLN 5 and cost PLN 5,02.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.