Fed Hikes Rate by 75bps
The Federal Reserve has announced another 75 basis points interest rate hike. The United States (US) central bank revealed the rate increase at the latest Federal Open Market Committee Wednesday in a move to combat inflation pressure.
Worsening macroeconomic figures that follow covid-19 lockdown and its direct impact on energy costs, coupled with the ongoing Russia-Ukraine have impacted the global growth outlook.
The statistics office recently announced that U.S Consumer Price Index (CPI) registered a higher than expected inflation rate of 8.3% in August as citizens battle high energy costs, though the figure moderated when compared with the preceding month’s record.
US Fed rate hikes come after four previous 75-basis point increases earlier this year, bringing the Fed’s funds rate to 3% to 3.25% -, its highest point since 2008, as the central bank struggles to tame inflation.
Today’s move was widely expected, particularly after inflation rates came in hotter than anticipated on September 13. The latest Consumer Price Index data showed that inflation hit 8.3% in August, 20 basis points higher than estimations of an 8.1% print.
Fed chair Jerome Powell made it clear that the U.S. central bank was committed to raising rates in Jackson Hole last month when he warned of further “pain” ahead for markets. READ Inflation: Analysts See 75bps Interest Rate Hike in Sept.
The Federal Open Market Committee “anticipates that ongoing increases in the target range will be appropriate.”
It will also continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as previously described in its plan to shrink its balance sheet.
By raising the cost of borrowing, the central bank intends to reduce demand to bring it more in balance with demand. When supply and demand are more aligned, then price increases should recede. #Fed Hikes Rate by 75bps
