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MARCH 23, 2023

FEDERAL RESERVE

The Federal Reserve went ahead and raised its benchmark rate by a quarter point – a move largely expected by investors. Fed Chair Jerome Powell also announced that they are scaling back the plans of raising rates and stated that they might only do one more increase this year. Investors appeared unfazed by this news, however, things took a turn back after Powell addressed reporters and stated that a rate reduction was not the Fed’s primary plan – something that definitely caused uncertainty among investors!

DEPOSITS ON RISK?

Another remark that didn’t seem to resonate positively with investors was Treasury Secretary Janet Yellen opinion regarding the approach of regulators to insuring all deposits of US banks. Yellen stated that, although the Fed reassured that all depositors’ savings were safe, regulators were not considering offering full protection to all deposits in banks without the approval of Congress.

MARKET REACTION

Markets didn’t seem to react negatively to Fed’s announcement as they considered the rate hike as a cautious approach to combat inflation. Nevertheless, after Yellen’s statement, markets are definitely not fully convinced about the accuracy or effectiveness of the Fed’s decision regarding interest rates. Overall, the market appears uncertain and cautious as it assesses the longer-term implications of these developments.

TIKTOK IN THE HOT SEAT

The future of TikTok is in the balance as CEO Shou Zi Chew is set to appear in front of Congress today. He will be facing questions surrounding the app’s privacy practices since Governments around the world are worried about TikTok’s connections to China. Some countries have already banned the app on official devices, and President Biden is considering joining these countries unless its Chinese owners sell their stake in the company.

Worth noting that although today’s hearing is focused mainly on TikTok, TikTok is not the only tech platform that collects our data and has control over it. That is why the US government could also be facing some questions about how technology is handled overall in tech platforms, such as Meta’s Facebook and Instagram.

INTERNATIONAL FINANCIAL NEWS

It looks like the Bank of England is ramping up its efforts to control inflation, which has picked up more than they were expecting. BOE is expected to raise the interest rate to around 4.25%. Some traders believe the bank should pause rates to let the banking system and consumers adjust to the borrowing cost hikes, however, many economists and investors believe a rate hike is crucial to control inflation and maintain economic stability.

Also, Norway’s central bank increased its interest rates by 25 basic points, while the Swiss National Bank increased its interest rates by 50 basic points. These recent rate hikes indicate their concerns over inflation and the need to stabilize their economies.

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