The Federal Reserve continues its battle to reduce inflation by authorizing a quarter-point hike in its benchmark interest rate, indicating it expects additional increases in the future.
The federal funds rate will increase to a range between 4.50 percent and 4.75 percent, the highest level since 2007.
“The Committee believes that continued increases in the target range would be necessary in order to achieve a monetary policy stance that is sufficiently restrictive to restore inflation to 2% over time,” the Federal Open Market Committee (FOMC) said in a statement.
Investors anticipated the 25 basis point increase, the Fed’s ninth straight increase since raising its target in March 2022. The Fed boosted its target range by half a percentage point at its previous meeting in December.
Markets anticipate that the Fed will raise interest rates one more time this year at the meeting before taking a break to assess how the economy and inflation react to the highest interest rates in over a decade. Jerome Powell, the head of the Fed, and other central bank officials have warned the market against assuming that a stop or slowdown in rate hikes signals an impending switch to rate lowering. However, the prices of major financial assets indicate that investors anticipate a rate decrease before the end of the year.
“In evaluating the extent of future increases in the target range, the Committee will consider the cumulative tightening of its monetary policy, the delays with which monetary policy influences economic activity and inflation, as well as economic and financial events,” the FOMC stated.
The FOMC is “very attentive to inflation concerns,” according to the statement, a language the Fed has used since its second hike in May of last year.
In this statement, the Fed removed references to the pandemic, including one that ascribed inflation to “supply and demand imbalances that were connected to the outbreak, increased food and energy costs, and broader pricing pressures.” The Fed also no longer claims to be actively monitoring “public health” when analyzing potential monetary policy adjustments.
Inflation has improved in recent months, according to the Fed.
“Inflation has eased slightly but remains high,” the statement lamented.
Comments are closed.