Rates
In this buzz: Rates; Stocks & Equities; Goldman Sachs; the Futures market and more…
- Equities began yesterday higher as trader reacted positively to the slightly less than consensus headline CPI data for March.
- But stocks lost their momentum throughout the trading session as the focus changed to the still stubbornly high headline CPI and the release of the March FOMC minutes.
In short:
Despite acknowledgement from the Fed during its March deliberations, that ① the recent banking crisis increases the risk of recession, the market began to price in increased probability that ② the Fed isn’t quite finished raising rates. Earlier this month, ③ fed funds futures were pricing in less than a 44% chance of a rate hike at the FOMC’s next meeting in early May. After yesterday, those odds jumped to over 70% for a 25 basis point hike at the next meeting.
Not everyone agrees, however.
Two Fed presidents offered diverging views on the path of rate hikes.
❗Goldman Sachs changed its mind about the path of rates as well, saying it no longer expects the Fed to raise rates in June.
❗The futures market changed course as well, with a reversal in course being priced in by the end of summer and rates ending the year lower.
*Interest Rate
- The interest rate is the amount charged on top of the principal by a lender to a borrower for the use of assets.
- An interest rate also applies to the amount earned at a bank or credit union from a deposit account.
- Most mortgages use simple interest. However, some loans use compound interest, which is applied to the principal but also to the accumulated interest of previous periods.
- A borrower that is considered low risk by the lender will have a lower interest rate. A loan that is considered high risk will have a higher interest rate.
- The APY is the interest rate that is earned at a bank or credit union from a savings account or CD. Savings accounts and CDs use compounded interest.
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