The Federal Reserve of the United States has met the forecasts of the market consensus, raising its interest rates by 75 basis points to 2.50% at their July meeting. This is the third consecutive increase so far this year, and the second in a row of 0.75%.
The Fed has not registered such high rates for three years, specifically since June 2019, the last time before today that they were at 2.5%.
Recent spending and output indicators have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains highreflecting supply and demand imbalances related to the pandemic, rising food and energy prices, and general price pressures.
Russia’s war against Ukraine is causing enormous human and economic hardship. The war and related events are putting additional upward pressure on inflation and weighing on global economic activity. The Monetary Policy Committee is very attentive to the risks of inflation.
The Committee tries to achieve maximum employment and an inflation rate of 2% in the long term. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2.25-2.5%, and anticipates that continued increases in the target range will be appropriate. In addition, the Committee will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as outlined in Plans to Reduce the Size of the Federal Reserve’s Balance Sheet that were released in May. The Committee is firmly committed to bringing inflation back to its 2% target.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information on the economic outlook. The Committee will be prepared to adjust the monetary policy stance as appropriate if risks arise that may prevent the achievement of the objectives. The 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.
Voting in favor of the monetary policy action were Jerome H. Powell, Chairman; John C. Williams, Vice President; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M.Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.
Source: Fx Street