Fed Issues Another Half-Point Interest Rate Hike, As Expected - Modern Distribution Management

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Fed Issues Another Half-Point Interest Rate Hike, As Expected

It follows three-straight .75-point increases.
Federal reserve system symbol on hundred dollar bill closeup macro shot

The U.S. Federal Reserve announced the approval of an interest rate hike of half of a percentage point on Thursday afternoon as its latest measure to curb inflation, while signaling further — but smaller increases — are likely through next spring.

The 0.5% rate increase from the country’s central bank was in line with economists’ expectations and puts current interest rates into the 4.25% to 4.5% range, which is a level intended to slow economic growth — far above the 2% objective the Fed said it’s committed to returning to.

The bank said it seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. But to do so, it projects needing to increase rates by an additional 75 basis points by the end of 2023 and forecasts a rise in unemployment as economic growth stalls.

In a press conference following Thursday’s Fed Open Committee Meeting, Fed Chairman Jerome Powell said it’s too early to discuss the possibility of the bank eventually cutting interest rates and any adjustment to that 2% inflation target. He did note, however, that recent reports indicating the rate of inflation is slowing were a welcome sign.

“The report is very much what we expected and hoped for,” Powell said, but adding, “It will take substantially more evidence to provide confidence that inflation is on a sustained downward path.”

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