'Powell optimism' in global markets

Stock indices and US bonds started to rise after Fed Chairman Powell said that a 75 basis point rate hike has not been evaluated for the time being.

While the US 2-year and 3-year bond yields fell by 18 basis points for a while, they closed down 14 and 15 basis points respectively.

The S&P 500 index finished the day up 3 percent and the Nasdaq 100 index 3.4 percent. The Bloomberg Dollar Index closed at 1,235,6 with a loss of 0.86 percent.

Asian stock indices are also rising on the new trading day. The MSCI Asia Pacific Index moved up after three days of decline, led by Hong Kong stocks.

Markets in Japan are closed.

The Fed's worst rate hike since 2000
The Fed raised interest rates by 50 basis points, the biggest since 2000, and signaled that it could raise similar rates in the next few meetings.

Fed Chairman Jerome Powell, who held a press conference after the decision was announced, said: "Inflation is very high and we understand the difficulty it is causing and we are acting quickly to bring it down."

“There is broad consensus in the committee that an additional 50 basis points increase should be on the table for the next few meetings,” Powell added.

The Fed Chairman said speculation that a 75 basis point increase could be made in the coming months was "not something the committee is actively considering". Officials also decided to start shrinking the Fed's $8.9 trillion balance sheet as of June 1.

In the first phase, there will be a monthly reduction of $30 billion in Treasury bonds and $17.5 billion in mortgage-backed securities. After three months, the reductions will be increased to $60 billion and $35 billion, respectively.

Bloomberg Economics expects the Fed to raise interest rates by 50 basis points in the next two meetings and the funding rate to exceed the FOMC members' neutral rate estimate of approximately 2.5 percent in the last quarter of this year.

While Pimco CEO Emmanuel Roman predicts that the Fed will raise interest rates by an additional 175 basis points by the end of 2022, Goldman Sachs economists added a 50 basis point increase in July to their forecast for a 50 basis point hike in June.