Comment by Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International

“As expected, the Fed hiked rates by 50 basis points today and announced its quantitative tightening program. The overall tone was hawkish, but critically, Chair Powell ruled out scope for 75 basis point hikes for now. Further 50 basis point hikes remain on the table over the next two meetings.

This is the most aggressive move since 2000, but Fed hawkishness has been building into this meeting. We continue to think that, ultimately, the Fed will hike less than market expectations, but for now the hawkish stance is likely to remain intact given the strong state of the labour market and inflationary dynamics.

The Fed committed a policy mistake last year by letting inflation run out of control, and as a result, it could be walking a narrow road for some time as it looks to balance the tightening path without creating an accidental recession. When it comes to asset allocation, we remain cautious given the overall hostile Fed stance.”