Fed hikes rates another 75 basis points
2022.07.27 21:53
Budrigannews.com – The Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday in an effort to cool the most intense breakout of inflation since the 1980s, with “ongoing increases” in borrowing costs still ahead despite evidence of a slowing economy.
The rate-setting Federal Open Market Committee lifted the policy rate to a range of between 2.25% and 2.50% in a unanimous vote. Coming on top of a 75-basis-point hike last month, and smaller moves in May and March, the Fed has raised its policy rate by a total of 225 basis points this year to a level now that most Fed officials feel has a neutral economic impact, effectively marking the end of pandemic-era monetary stimulus. STORY:
MARKET REACTION:
STOCKS: The S&P 500 added to gains and was up 1.41%
BONDS: The 10-year U.S. Treasury note yield rose 2.7685%; The yield on the two-year slipped to 3.0446% after the Fed statement.FOREX: The dollar briefly went up but was last off 0.12%
COMMENTS:
MICHAEL PEARCE, SENIOR US ECONOMIST, CAPITAL ECONOMICS, NEW YORK
“The Fed’s decision to raise interest rates by a further 75bp to 2.25%-2.50% takes them close to their ‘neutral’ level. With inflation set to fall from here and further signs of economic weakness, we suspect officials will be more cautious raising rates from here, shifting to a smaller 50bp move in September.”
BRIAN COULTON, CHIEF ECONOMIST, FITCH RATINGS
“The Fed’s statement acknowledged the recent softening in activity data but this is given short-shrift in the presence of what is still a very robust labor market and unrelenting inflation pressures. Despite this being another outsize rate increase of 75 bps, the Fed has still only raised interest rates back into line with its own estimates of the long-run neutral rate. Given where core inflation and the unemployment rate currently stand this underscores that monetary policy adjustment still has quite a long way to go. Market expectations that the Fed may be cutting rates again next year look premature.”
JACK ABLIN, CHIEF INVESTMENT OFFICER AND FOUNDING PARTNER, CRESSET CAPITAL, CHICAGO
“This was widely expected and encouraging that it was a unanimous decision. This does represent the most aggressive series of fed moves since Volcker.”
“Anything other than the outcome that told us would have been a negative surprise. Too little would’ve undermined confidence in the Fed and too much would have undermined confidence in the economy. It was well telegraphed and properly balanced against expectations.”
“They’re still highly attentive to inflation risks. It should underscore their single-minded focus on inflation.”
