Here is How Market Interpret on Fed Raising 25bps as Expected

The Federal Reserve raised rates by 25 basis points, or 0.25%, as was widely expected. Federal Reserve Chair Jerome Powell then held a news conference, he said the disinflationary process of the economy has begun. Of course, Powell added, it's too early to declare victory over inflation.

Jerome Powell said he doesn’t expect the Fed to cut rates this year, as some major strategists’ project. “Given our outlook, I don’t see us cutting rates this year, if our outlook comes true,” the Fed chair said.

DoubleLine Capital CEO Jeffrey Gundlach said he sees one additional rate hike from the Federal Reserve before the central bank ends its tightening cycle.

According to CME's Fed Watch Tool, there is an 82.7% chance the Fed will raise rates by 25 basis points to a range of 4.75% to 5.00% in March, and a 17.3% chance it will keep rates unchanged. The probability of keeping rates on hold by May is 8.6%, the probability of a cumulative 25 basis point rise is 56.9% and the probability of a cumulative 50 basis point rise is 34.5%.

Chart 1 Mar 2023 Rate Hike Probability

Under these circumstances, investors should be looking for stocks with the growth and benefitting from inflation easing case.