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The U.S. Federal Reserve raised its benchmark federal funds rate by 0.25% on Wednesday after markets priced in near 100% certainty the Federal Open Market Committee (FOMC) would codify the quarter-point increase. The FOMC statement further specified that continued rate hikes should bring inflation back to the 2 per cent target range.
FOMC Describes expectations with respect to future rate increases.
The US central bank raised the federal funds rate on Wednesday, increasing it from 0.25% to the current 4.5% to 4.75% bracket. The FOMC detailed in a statement that indicators show there has been “modest growth in spending and production” and job gains have been “robust in recent months.” However, the committee says that although inflation has gone down, it is "still high" and believes that the conflict in Ukraine is "causing enormous human and economic hardship.”
"The committee is seeking to reach a maximum of 2 per cent employment and inflation over the long term," says the FOMC statement. To support these objectives, the committee has decided to increase the target range for federal funding to 4-1/2 to 4-3/4%. The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Federal funds have been raised eight times in a row and are now at their highest level in approximately 15 years. The Federal Free Market Committee said that "continuous increases" would be appropriate for each meeting since March. The market analysts and investors showed contradictory signals regarding the Fed's rate hikes, There is an expectation that the central bank will relax its position, and others expect Jerome Powell to keep raising the reference interest rate. Wednesday's U.S. Federal Reserve rate increase was the lowest since March 2022.
On Wednesday, Powell said the monetary squeeze will continue "until work is done" and added that "the disinflationary process that is now underway is truly in its infancy." The crypto economy appeared unfazed by the Fed’s decision on Wednesday, and prices jumped 0.9% higher after Powell’s comments. rose 1.4% and ethereum (ETH) jumped more than 2% higher.
After slipping through trading sessions early on Wednesday morning, U.S. equities recovered most of the losses as a result of the Federal Free Market Committee's statement. The four US stock market benchmarks are in green as Wednesday's closing buzzer approaches. Precious metals such as gold and silver also saw gains, with gold up 0.79% and silver up 0.72% following the Fed’s statement.
What do you think of the Federal Reserve's decision to increase the reference interest rate and what will be the long-term economic impact? Share your reflections on this topic in the comments section below.
