U.S. raises interest rates to 22-year highs

Wednesday’s Federal Reserve will raise benchmark overnight rates by half a percentage point, the biggest rise in 22 years, and will begin cutting bond holdings next month as a further step in the fight to lower inflation. Stated.

The US central bank has unanimously set the target federal funds rate in the range of 0.75% to 1%, which could possibly further increase borrowing costs of similar magnitude.

Despite a decline in gross domestic product in the first three months of this year, “household spending and corporate fixed investment remain strong. The Federal Open Market Committee has finished its two-day policy meeting in Washington. In a later statement, he said:

Inflation has “remained rising” and threatened to keep pressure high due to the war in Ukraine and the blockade of the new coronavirus in China, he said. “The Commission is very careful about inflation risk.”

The Fed’s balance sheet surged to about $ 9 trillion and fell by $ 47.5 billion per month in June, July and August as the central bank sought to protect the economy from the COVID-19 pandemic, according to a statement. The decline will increase to $ 95 billion per month in September.

Policymakers did not release new economic forecasts after this week’s meeting, but data since the last meeting in March show that inflation, wage growth, or a sharp pace of employment has begun to slow. I hardly felt it.

After the announcement, the US stock market has risen, but government bond yields have remained almost unchanged. The dollar has weakened moderately against a basket of currencies of major trading partners.

According to CME Group’s FedWatch tool, interest rate futures continue to reflect the Fed’s bet to raise the policy rate from 3% to 3.25% by the end of the year, with a few percent points at this pace. .. Above, the rate hike to achieve.

Michael Brown, Head of Market Intelligence at Caxton in London, said the Fed “repeated the recent desire to show a positive path to raising interest rates and raise interest rates to neutral levels as soon as possible.” “But given the considerable amount of hiking already priced on the market … the hawkish standards of surprise have always been high.” U.S. raises interest rates to 22-year highs

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