On Wednesday, the Federal Open Market Committee (FOMC) and Fed chair Jerome Powell held a press conference concerning the American economy, the central bank’s plans to address inflation, and the ongoing Russia-Ukraine war. Powell announced that the FOMC decided to increase the benchmark bank rate by a quarter percentage and further noted the Fed anticipates “ongoing increases…will be appropriate.”
Federal Reserve increases benchmark rate
Federal Reserve announces that the benchmark rate for interest has been raised from close to zero to 0.25%. The goal is 0.25% to 0.50%.
Fed chair Jerome Powell revealed the rate hike on Wednesday after mentioning the Russia-Ukraine ongoing conflict and he stressed that “the implications for the U.S. economy are highly uncertain.”
However, after mentioning that the U.S. economy, particularly the jobs sector was showing strength, Powell quickly explained that the FOMC raised the benchmark bank rate by a quarter percentage and highlighted that “ongoing increases…will be appropriate.”
Powell also discussed tapering back the Fed’s purchase program but noted that details on that particular arrangement would be disclosed at a later meeting. It was December 2018, long before the Covid-19 pandemic. That’s when the Fed last raised its benchmark interest rate.
The Fed’s post-meeting statement also discussed reducing the U.S. central bank’s balance sheet at the next FOMC meeting. “The committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting,” the post-meeting statement details.
The FOMC anticipates six additional rate increases at every FOMC meeting, in addition to the quarter-percent increase. The central bank expects rates to rise an additional three times in the next year.
“The committee is determined to take the measures necessary to restore price stability. The U.S. economy is very strong and well-positioned to handle tighter monetary policy,” Fed chair Jerome Powell detailed during his press conference statements.
Federal Reserve says US Inflation is Still High
After the rate hike, the economist and gold bug Peter Schiff tweeted about the Fed’s move. “The only reason the Fed hiked rates is inflation,” Schiff said. “Prior to admitting inflation wasn’t transitory, the Fed wasn’t planning any rate hikes in 2022. Given current geopolitical risks and weakness in the economy and financial markets, the Fed just ran out of excuses to stay at zero.”
According to the U.S. central banks, inflation was indeed high in post-meeting statements. “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” the FOMC rate hike announcement explains.
Meanwhile, the popular U.S. indexes Nasdaq, Dow Jones Industrial Average, NYSE, and S&P 500 all remained in green after the FOMC rate hike announcement. After a short jump on Wednesday’s early trading session (ET), crypto economy markets remained stable.
Following the FOMC announcements, the crypto economy has risen 1.2% over the past 24 hours. One ounce (.999) of fine gold fell 0.17% in the last 24 hours. At press time, one ounce of gold is exchanging hands for $1,914 per ounce, down 7.08% since the asset’s recent $2,060 all-time high.
How do you feel about the Federal Reserve increasing the benchmark interest rate, for the first-time since 2018. Please comment below to let us know your thoughts on this topic.
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