Fed raises Interest Rates by 0.25%
At the end of a two-day meeting, the Federal Reserve (Fed) decided to raise interest rates by 0.25% and gave little indication that the central bank was nearing the end of its tightening path. Following the Fed's decision, the benchmark interest rate is now in the 4.5% to 4.75% range.
In line with market expectations, the Federal Open Market Committee (FOMC) raised its benchmark interest rate by 0.25%, bringing the range to 4.5% - 4.75%, the highest level since October 2007. This move marks the 8th rally in the roadmap starting in March 2022.
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The Fed is aiming to raise interest rates to curb in inflation which has shown signs of cooling recently but remains near its highest level since the early 1980s.
The Fed hopes that it can continue to bring inflation down to its 2% target without triggering a deep recession or causing the unemployment rate to rise significantly from the current 3.5%, levels rarely seen in recent decades.
In addition to raising interest rates, the Fed also reduced its bond holdings. Accordingly, the value of bonds held by the Fed has decreased by about $445 billion since June, as the Fed aims to withdraw $95 billion in maturing bonds instead of reinvesting it.
The market is closely watching for signs that the Fed will stop raising rates. At its December meeting, members of the FOMC said they see a terminal rate, or interest rate the Fed considers reasonable, to be 5.1%. The market is betting the number is closer to 4.75% and expecting the Fed to start cutting rates later this year, following a 0.25% hike in March.
Fed raises Interest Rates by 0.25%
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