The US Federal Reserve announced on Wednesday that raises the main monetary policy rate by 75 basis points, to the range of 3.75-4%, after the November monetary policy meeting. This decision was in line with market expectations.
This is the fourth consecutive meeting in which rates have been raised by 75 basis points. US interest rates reach their highest level since the end of 2007.
FOMC Statement
Recent indicators point to modest growth in spending and output. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, 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 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 3.75% and 4%. The Committee anticipates that continued increases in the target range will be appropriate to achieve a monetary policy stance tight enough to return inflation to 2% over time.. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as outlined in the 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 monitoring 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 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.
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
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