On Wednesday, the Federal Open Market Committee (FOMC) and Fed Chairman Jerome Powell held a press conference regarding the US economy, the central bank’s plans to fight inflation and the ongoing war between Russia and Ukraine. Powell announced that the FOMC had decided to raise the benchmark bank rate by a quarter of a percentage point and further noted that the Fed expects “ongoing increases…will be appropriate.”
The Federal Reserve raises the benchmark discount rate
For the first time since the start of the Covid-19 pandemic, the Federal Reserve announced that it was raising the benchmark interest rate from near zero to 0.25% in order to target 0.25% and 0, 50%.
Fed Chairman Jerome Powell revealed the rate hike on Wednesday after mentioning the ongoing conflict between Russia and Ukraine and he stressed that “the implications for the US economy are highly uncertain.”
However, after mentioning that the U.S. economy, particularly the jobs sector, was showing strength, Powell was quick to explain that the FOMC had raised the benchmark policy rate by a quarter of a percentage and pointed out that ” ongoing increases… will be appropriate.”
Powell also discussed scaling back the Fed’s buying program, but noted that details of that particular arrangement would be disclosed at a later meeting. The last time the Fed raised the benchmark policy rate was in December 2018, well before the Covid-19 pandemic.
The Fed’s post-meeting statement also touched on the US central bank’s balance sheet reduction at the upcoming FOMC meeting. “The committee expects to begin reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities at a future meeting,” the post-meeting statement detailed.
In addition to the quarter percent increase, the FOMC expects six additional rate hikes at each FOMC meeting. Moreover, the central bank also plans to raise rates three more times next year.
“The committee is determined to take the necessary steps to restore price stability. The American economy is very solid and well placed to manage a stricter monetary policy,” detailed Fed Chairman Jerome Powell during his statements at the press conference.
Federal Reserve says US inflation remains high
After the rate hike, economist and gold scientist Peter Schiff tweeted about the Fed’s decision. “The only reason the Fed raised rates is inflation,” Schiff said. noted. “Before admitting that inflation was not transitory, the Fed was not expecting any rate hikes in 2022. Given the current geopolitical risks and the weakness in the economy and financial markets, the Fed had no no more excuses to stay at zero.”
The US central bank admitted that inflation remained high in post-meeting statements. “Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising energy prices and broader price pressures,” says the rate hike announcement. of the FOMC.
Meanwhile, the popular U.S. indices Nasdaq, Dow Jones Industrial Average, NYSE and S&P 500 all remained in the green following the FOMC rate hike announcement. Markets in the crypto economy remained consolidated, after a brief jump in early morning trading sessions on Wednesday (ET).
The crypto economy is still up 1.2% in the past 24 hours, following statements from the FOMC. The price of an ounce of .999 fine gold is down 0.17% in the past 24 hours. At press time, an ounce of gold is trading at $1,914 per ounce, down 7.08% from the asset’s recent all-time high of $2,060.
What do you think of the Federal Reserve raising the benchmark interest rate for the first time since 2018? Let us know what you think about this topic in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
Warning: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.