Federal Reserve officials have decided to raise their benchmark interest rate by a half percentage point. The central bank will also start reducing its balance sheet. HeleneBraunn reports.
In a widely anticipated move, the Federal Reserve raised the official U.S. interest rate by half a percentage point, while saying it will reduce the size of its balance sheet by $47.5 billion a month for three months and going up to $95 billion a month starting in September, according to aDuring a press conference following the decision, Fed chair Jerome Powell also said that"50 basis points should be on the table for the next couple meetings.
“Inflation is much too high and we understand the hardship it is causing,” Jerome Powell said. “We’re moving expeditiously to bring it back down.”The interest rate on Fed funds, which is what banks charge each other for overnight loans, will go up to a range of between 0.75% and 1%. The Fed had cut the rate to zero in March 2020 to stimulate markets when coronavirus-related lockdowns struck the economy and had held it there until earlier this year.
Institutional outflows in bitcoin hit an all-time high ahead of the meeting as market participants are waiting for another capitulation before returning to the market, according to Scott Bauer, a former Goldman Sachs trader who's now CEO of Prosper Trading Academy.and a so-called “dot plot” showing that the median expectation for the Fed funds rate at the end of 2022 was for at least seven 25-basis point hikes over the course of 2022, which would push the rate up to 2.8%.
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