The Federal Reserve is considering an interest rate hike at its March meeting that could be as high as 0.5%. We haven’t had a rate increase that high since the dot-com bust in 2000. If we did have a half-point rate hike, how would the stock market perform?
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The consumer price index rose 0.6% in January from the prior month and 7.5% vs. a year ago, the biggest annual gain since February 1982. Rising inflation prompted the Federal Reserve to turn more hawkish. Treasury yields jumped and the stock market, particularly the tech sector, took a beating.
As of Tuesday, the odds for a rate hike of 0.25% to 0.50% was 42%, compared with 58% for an increase of 0.50% to 0.75%, according to the CME Group’s FedWatch tool, which tracks interest rate futures. But on Thursday, the odds for a quarter-point hike were higher than for a half-point increase.
