Fed introduced another unusually high rate hike

Fed lifted rates by another 0.75 percentage point: further increases are expected

Federal Reserve

Fed introduced another unusually high rate hike. Source: shutterstock.com

According to WSJ, the Federal Reserve approved another unusually large interest rate increase and signalled more rises will likely follow to combat inflation. 

“These rate hikes have been large, and they’ve come quickly. And it’s likely that their full effect has not been felt by the economy, so there’s probably some significant additional tightening in the pipeline.”
Jerome Powell,
Fed Chairman

So far, Fed Chairman Jerome Powell didn’t provide specifics about the size of upcoming rises. However, he hinted at an eventual slowdown. Mr Powell noted there was an evident slowdown in economic growth during the second quarter. Namely, consumer spending, hiring and housing activity have all declined. 

However, rate increases won’t stop simply because growth slows. At present, inflation is well above the Fed’s 2% target. Thus, the watchdog wants to see economic growth slow below its estimated long-term trend of around 1.8%.

The stock market immediately reacted to the announcement. The S&P 500 gained 2.6% to close at 4023.61. Yields on the benchmark 10-year Treasury note, on the other hand, fell to 2.79%. 

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