Fed Hikes Rate by 25bps, Officials Maintain Hawkish Outlook
The Federal Reserve raised interest rates by 25 basis points (bps) Wednesday for the first time in several years in the face of stubborn inflation.
Federal Open Market Committee (FOMC), under Fed Chair Kevin Warsh, voted unanimously to increase the federal funds rate to a range of 3.75 percent to 4 percent.
The monetary policy hike marks the first time the Fed has hiked rates in more than three years, and the first time in nearly a year since the range touched 4 percent.
Looking ahead to the final two FOMC meetings of the year, a majority of committee officials project at least one rate hike. Twelve of 18 FOMC officials projected a single rate hike, according to a quarterly summary of economic projections the Fed released on Wednesday.
Four officials projected two hikes, while two predicted a pair of holds. Warsh, who has strayed away from issuing forward guidance as Fed chair, did not provide a projection for the Fed’s last quarterly summary in June.
Markets widely expected officials to raise rates by a quarter-point on Wednesday in an effort to tame inflation, which remains above the Fed’s 2 percent target amid the war with Iran.
Traders were pricing in a nearly 93 percent chance that the FOMC would raise rates by a quarter point Wednesday morning, according to the CME Group’s FedWatch tool, which tracks bets placed on future Fed decisions.
The Fed’s latest dot plot shows that 18 of the 19 officials submitted dot plot projections (consistent with June), of whom 16 believe rates should be hiked again this year.
Specifically, 4 officials believe the cumulative hike in 2026 should be 75 basis points (1 in June), 12 officials believe the cumulative hike should be 50 basis points (5 in June), 2 officials believe the cumulative hike should be 25 basis points (3 in June), 0 officials believe the 3.5%-3.75% rate should be maintained this year (8 in June), and 0 officials believe there should be a cumulative 25-basis-point cut (1 in June). South African Rand Weakens Against Crosses as Oil Tops $108
