Fed raises interest rates to 0.75-1%
23:04
Federal Reserve Chair Jerome Powell is poised to unleash the U.S. central bank’s most aggressive action to battle inflation in decades, but investors will be focused on parsing his words to see if even bigger moves are ahead.
The Federal Open Market Committee just raised interest rates by a half point at the conclusion of its two-day policy meeting, making its largest hike since 2000, and also announced plans to reduce the size of its bloated $8.9 trillion balance sheet.
Such a scenario, which investors strongly anticipated, means that the federal funds rate are in the range of 0.75-1 percent. Earlier, the range was 0.25-0.5 percent.
A 50 basis-point increase is the largest since Alan Greenspan’s tenure as chairman. Add in the impact of shrinking the balance sheet and the scale of the policy shift recalls the 1980s measures of his predecessor, Paul Volcker, reflecting central bankers’ sense of urgency to bring down inflation to the highest level in four decades.
“We believe that after the FOMC hikes by a half-point and presents a detailed plan to reduce the Fed balance sheet – to start imminently – Powell will avoid definitive guidance about the size of future hikes, as policy makers assess how the runoff is affecting the economy in coming months,” Bloomberg economists said.
