On Wednesday, the Federal Open Market Committee (FOMC) and Fed Chairman Jerome Powell held a press conference concerning the US economy, the central bank’s plans to address inflation, and the ongoing Russo-Ukraine war. Powell announced that the FOMC had decided to increase the benchmark bank rate by a quarter percent and the Fed further said that “ongoing hikes … would be appropriate.”
Federal Reserve raises benchmark bank rate
For the first time since the start of the COVID-19 pandemic, the Federal Reserve announced that it raised the benchmark interest rate from zero to 0.25% to target 0.25% and 0.50%.
Fed Chairman Jerome Powell disclosed the rate hike on Wednesday after referring to the ongoing Russia-Ukraine conflict and insisting that “the implications for the US economy are highly uncertain.”
However, after noting that the US economy, particularly the employment sector, was showing strength, Powell quickly explained that the FOMC raised the benchmark bank rate by a quarter percentage point and highlighted that “ongoing growth … would be appropriate.”
Powell also discussed reducing the Fed’s buying program, but noted that the details of that particular arrangement would be disclosed at a later meeting. The last time the Fed raised the benchmark bank rate was in December 2018, long before the Covid-19 pandemic.
The Fed’s post-meeting statement also discussed reducing the US central bank’s balance sheet at the next FOMC meeting. In a post-meeting statement detail, “the committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at an upcoming meeting.”
In addition to the quarterly percentage increase, the FOMC expects an additional six rate hikes at each FOMC meeting. Besides this, the central bank also expects an additional thrice increase in rates next year.
“The committee is determined to take necessary measures to restore price stability. The US economy is very strong and well-positioned to handle tough monetary policy,” Fed Chairman Jerome Powell elaborated during his press conference statement.
Federal Reserve says US inflation remains up
After the rate hike, economist and gold bug Peter Schiff tweeted about the Fed’s move. “Inflation is the only reason the Fed raises rates,” Schiff said, “Before acknowledging inflation was not temporary, the Fed was not planning any rate hikes in 2022. Given the current geopolitical risks and weakness in the economy and financial markets, the Fed is out of excuses to stay at zero. Done.”
The US central bank did indeed acknowledge inflation remains high in post-meeting statements. “Inflation has risen, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures,” explains the FOMC rate hike announcement.
Meanwhile, popular US indexes Nasdaq, Dow Jones Industrial Average, NYSE, and S&P 500 all remained in the green following the announcement of the FOMC rate hike. After a brief surge during the early trading session on Wednesday (ET), the crypto economy market further consolidated.
Following the FOMC statements, the crypto economy is still up 1.2% in the last 24 hours. During the last 24 hours the price of one ounce of .999 fine gold is down 0.17%. At press time, an ounce of gold is exchanging hands for $1,914 an ounce, down 7.08% since the asset’s recent all-time high of $2,060.
What do you think about 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 comment section below.
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