US Central Bank Raises Rates by Half a Percentage Point – The Central Bank of the United States raised the benchmark interest rate on May 4, 2022, in order to combat increasing inflation. In a press release issued on Wednesday, the Federal Open Market Committee (FOMC) stated that the 12 members “agreed to raise the target range for the federal funds rate to 3/4 to 1%.”
The Federal Reserve also stated that “further increases in the target range are expected to be reasonable.” Furthermore, the FOMC statement released at 2:00 p.m. (ET) stated that the Ukraine-Russia conflict and China’s Covid 19-related lockdowns have left “implications for the US economy highly uncertain.”
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“Inflation is much too high, and we understand the difficulty it is inflicting, and we are moving promptly to bring it back down,” Fed chair Jerome Powell told reporters after the FOMC decision. “There is a broad view on the committee that additional 50 basis-point rises should be on the table during the next couple of meetings,” the central bank’s chairman stated.
The rate boost on May 4, 3/4 to 1% is the second in 2022, following the Fed hiked the benchmark rate on March 16, 2022. The Fed hiked the interest rate from near zero to 0.25 percent at the time, with the goal of achieving 0.25 percent and 0.50 percent.
The FOMC statement went on to say that economic activity in the United States “declined in the first quarter” and that inflation remains high. In addition to raising interest rates, the Fed intends to reduce its spending on Treasury securities and mortgage-backed assets.
“On June 1, the committee decided to begin reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, as outlined in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet which were issued in conjunction with this statement,” the FOMC statement concluded.
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Despite the rate hike, crypto markets were up 5.7 percent in the last 24 hours, indicating that the crypto economy is still growing.
On Wednesday afternoon, stocks soared as well, with the leading U.S. stock indexes (NYSE, Dow Jones, Nasdaq, and S&P 500) all seeing large increases. The Dow Jones Industrial Average, for instance, jumped over 900 points on the assumption that the central bank’s move was correct.
