The Federal Reserve on Wednesday approved its first interest rate hike in more than three years and indicated another is to come, as part of an effort aimed at combating inflation brought on by spiraling oil prices and other factors. In a move that markets widely anticipated , the central bank's Federal Open Market Committee voted 12-0 to increase its key interest rate by a quarter percentage point, or 25 basis points. The move brought the overnight funds rate to a target range of 3.75%-4%. "Inflation remains elevated," the committee said in its brief post-meeting statement . "Today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability." During a news conference , Chairman Kevin Warsh said inflation has been "too high ... for too long." "We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed," he said. "Today, the FOMC decided that this standard has not been satisfied." Warsh further explained that recent economic reports showed the economy, including the labor market, was strong. However, inflation remained above the central bank's target, and added that tension in the Middle East also contributed to the decision. "All three of of those things lend themselves to a firm unanimous decision today," he said. Despite a raft of conflicting recent statements from policymakers, markets had priced in a better than 90% chance that the FOMC would approve the increase, though there was chatter about the possibility of multiple dissents. Persistently high inflation readings coupled with statements from Warsh a few weeks ago had convinced Wall Street that the Fed would OK its first rate increase since July 2023. Updated projections the committee released Wednesday showed that a strong majority of officials think another hike is possible later this year. The dot plot grid of individual officials' expectations indicated that 16 of the 18 participants Warsh has chosen not to submit a dot since taking the position expected another rate increase, with four of those seeing two more as possible. Two participants expected the committee to stop at one hike. However, there are no increases penciled in for subsequent years, with one cut each indicated for 2028 and at least one for 2029. Officials also nudged up their expectations for inflation this year. They see the headline personal consumption expenditures price index at 3.7% and core excluding food and energy at 3.4%, both 0.1 percentage point higher than the last update in June. The Fed doesn't expect to reach its inflation target until 2029, though it sees both measures dropping off sharply in 2027 2.3% for headline and 2.5% for core. The committee had been on hold all year and was expected to stay there, until the tide began turning towards a hike in late August. The Fed rarely only moves once, as policymakers generally eschew incremental decisions when they think inflation is too high and needs elevated rates, or when growth is too slow and the...
🔥 EXCLUSIVE PARTNER OFFER
TOPUMP TB2 PRO Mini Portable Electric Pump for Bike Cordless Tire Inflator 120PSI Max 450mAh Battery with Screen Fast Charging
Special Price
⚡ Flash sale! Get the best deals on AliExpress today. Hurry, stocks are limited!
Affiliate link — Commission earned at no extra cost to you
© EcoNews DZ — Global Economic & Financial News
Comments
Post a Comment