The U.S. Federal Reserve has decided on Wednesday to raise interest rates by 75 basis points for the fourth consecutive, reaching between 3.75 percent and 4 percent, according to Federal Open Market Committee’s (FOMC) statement.
This is a part of the Fed’s hard-line policy approach to cope with inflation rates that have reached their highest levels for more than 40 years.
The U.S. Fed’s decision met market expectations, which estimated an increase of three quarters of a percentage point and investors expect the bank to slow its pace before ending the rate hike cycle in March.
“Ongoing increases in the target range will be appropriate,” the central bank’s policy-setting FOMC said at the end of its two-day meeting.
FOMC also added that, “in determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the plans for reducing the size of the Fed’s balance sheet that were issued in May, the statement added.
The Committee predicts the increases will be appropriate in order to reach a position on monetary policy that is restricted enough to bring inflation back to 2 percent over time.
JPMorgan Chase & Co said U.S. inflation is in its final stages and could slow soon, noting that controlling inflation could push bond yields to support rising stocks.
