The Fed meets expectations and raises its rates 50 basis points to 1%

The Monetary Policy Committee of the United States Federal Reserve has decided at its meeting on Wednesday, May 4 raise your prime interest rate by 50 basis pointsas expected, until one%. This is the second rate hike so far this year, following the 25 basis point increase in March.

FOMC Statement

Although overall economic activity declined in the first quarter, household spending and business fixed investment remained strong. The job creation has been strong in recent months and the unemployment rate has declined substantially. The inflation remains highreflecting pandemic-related supply and demand imbalances, higher energy prices, and broader price pressures.

Russia’s invasion of Ukraine is causing enormous human and economic hardship. The implications for the US economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. Additionally, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is very attentive to the risks of inflation.

The committee seeks to achieve maximum employment and inflation at a rate of 2% in the long run. With the appropriate tightening of the monetary policy stance, the Committee expects inflation to return to its 2% target and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the fed funds rate to 1% and anticipates that continued increases in the target range will be appropriate.. In addition, the Committee decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, as outlined in the Plans to Reduce the Size of the Federal Reserve Balance Sheet that were issued in conjunction with with this statement. .

In assessing the appropriate monetary policy stance, the Committee will continue to monitor the implications of incoming data for the economic outlook. The Committee would be prepared to adjust the monetary policy stance accordingly if risks arise that could impede the achievement of the Committee’s objectives. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

They voted for the monetary policy action Jerome H. Powell, President; John C. Williams, Vice President; Michelle W. Bowman; Lael Brainard; James Bullard; Esther L. George; Patrick Harker; Loretta J. Mester; and Christopher J. Waller. Patrick Harker voted as an alternate member at this meeting.