Fed Chair Walsh concluded his first policy meeting last week, signaling a hawkish shift that drove the US Dollar Index above 100 and triggered a 7.87% decline in the Philadelphia Semiconductor Index on Tuesday (23rd). Market pricing now reflects over 50% probability of a 0.25% rate hike in September according to FedWatch data. The policy pivot comes as the Fed's balance sheet has expanded by $200.6 billion since pausing reduction in December, reaching $6.3764 trillion, while inflation concerns persist across equity sectors sensitive to borrowing costs.
Philadelphia Semiconductor Index Records 7.87% Drop on Tuesday
The Philadelphia Semiconductor Index experienced its second major decline in June on Tuesday (23rd), falling 7.87% at close after reaching an intraday low of 8.61%. The drop marks the fifth-worst performance for the index since the COVID pandemic period, though it remained below the 10.26% decline recorded on June 5. The sector had rallied over 100% in the preceding three months before the correction.
Fed Balance Sheet Expands $200.6 Billion Since December Pause
The Federal Reserve's balance sheet has grown by $200.6 billion since the central bank paused its reduction program in December, according to the latest data showing total assets of $6.3764 trillion. Chair Walsh's first policy meeting last week provided limited detail on balance sheet strategy while emphasizing a tightening bias on interest rates. Bank of America's forecast suggests the Fed may implement three rate increases totaling 0.75% this year.
US Dollar Index Breaks 100 Following Policy Meeting
The US Dollar Index climbed above 100 after last week's policy meeting, gaining nearly 2% over five days. The index reached 101.6 during Asian trading hours, marking a 14-month high. The rally follows a period of weakness that began in late January when Walsh received President Trump's nomination to lead the Fed, with the index having fallen to 95.55 before reversing course. The currency strengthened further after the US attacked Iran in late February, pushing the index above its 200-day moving average.
Federal Debt Reaches $39.32 Trillion Amid Rate Outlook
US federal debt stands at $39.32 trillion, according to the latest figures. Rising interest rates are expected to increase the government's financing costs as borrowing expenses climb. President Trump has consistently called for rate cuts since his election victory, though he has not publicly criticized Walsh's hawkish stance following last week's meeting. The Chair was nominated by Trump for the position.
FAQ
What did the Philadelphia Semiconductor Index do on Tuesday (23rd)?
The Philadelphia Semiconductor Index fell 7.87% at close on Tuesday (23rd), with an intraday maximum decline of 8.61%. This marked the sector's second significant drop in June and the fifth-worst performance since the COVID pandemic period.
Why did the US Dollar Index rise above 100 after the Fed meeting?
The US Dollar Index climbed above 100 following Chair Walsh's first policy meeting last week, which signaled a hawkish shift toward tightening. FedWatch data now shows over 50% probability of a 0.25% rate hike in September, strengthening the dollar as markets price in higher US interest rates.
How much has the Fed's balance sheet expanded since December?
The Federal Reserve's balance sheet has grown by $200.6 billion since the central bank paused its reduction program in December, reaching a total of $6.3764 trillion according to the latest data.
