Federal Reserve raised interest rates by 25 basis points
📌 The Federal Reserve announced on Wednesday the new interest rates. These rates increased as expected by 25 basis points from 5% to 5.25%. As a result of this increase, the U.S. central bank no longer expects to need to raise interest rates to control inflation. The next interest rate decision of the Fed will be on June 14.
📌 Following this decision, the value of the dollar initially depreciated on Thursday, with the EUR/USD rising 0.2% to 1.1075. This depreciation was reinforced by the fragility of the US banking system, with the failure of the First Republic Bank this weekend, meaning that three regional banks have failed in the last couple of months. It is now PacWest Bancorp’s stock that fell more than 50% late Wednesday afternoon after Bloomberg reported that the bank would explore strategic options on Thursday.
📌 Later this week, investors focused on the ECB’s rate decision, as a further 25 bp increase was announced, as expected. Upon hearing this decision, investors were more cautious at the beginning of the week causing European stocks to fall.