Fed raises rates by 25 basis points Six more times this year

2022-04-24 0 By

The Federal Open Market Committee (FOMC) raised the target range of the federal funds rate to 0.25%-0.5% at 2 am Beijing time on March 17, in line with market expectations.It was the fed’s first rate hike since December 2018 and was in line with market expectations.Members of the Federal Open Market Committee (FOMC) voted 8-1 in favor of the rate decision, following a unanimous decision at their last meeting, the FOMC said in a statement.Indicators of us economic activity and employment continued to strengthen, the statement said.Job growth has been strong in recent months and the unemployment rate has fallen sharply.Inflation remains high, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures.”With the stance of monetary policy appropriately firmer, the Committee expects inflation to move back to its 2 percent objective and the labor market to remain strong,” the statement said.In support of these objectives, the Committee decided to raise the target range for the federal funds rate to 0.25% to 0.50%, and expects that continued increases in the target range will be appropriate.In addition, the Committee is expected to begin reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities at its upcoming meeting.”In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the impact of incoming information on the economic outlook,” the Fed said.The Committee stands ready to adjust the stance of monetary policy as appropriate should risks arise that could impede the achievement of the Committee’s objectives.The median fed dot plot shows the Fed is expected to raise rates seven times in 2022, to 1.9% by the end of 2022 and 2.8% by the end of 2023.This is the second rate hike cycle since Fed Chairman Jerome Powell took office on February 5, 2018.In 2018, the Federal Reserve raised interest rates four times, the ninth time since the start of the first rate hike cycle after the subprime mortgage crisis.With the Us Federal Reserve’s interest rate hike on the ground, this week may become the most critical week for central banks in 2022, with many central banks following the US interest rate hike.The Bank of England will announce its decision on interest rates on The evening of March 17, and is widely expected to raise interest rates for the third time in a row by a quarter of a percentage point in an effort to curb a sharp rise in inflation.In addition, central banks in Japan, Russia, Brazil, Turkey and Indonesia are due to announce interest rate decisions this week, and the market expects Japan, Indonesia and Turkey to remain unchanged.Will the Fed’s interest rate hike affect China’s monetary policy?It is worth paying attention to that the special meeting held by the Financial Commission of The State Council on March 16 sent a series of positive signals to the market. This meeting emphasized the “prudent introduction of contractionary policies”, and has basically set the monetary policies of China and the United States this year are completely different.The FINANCIAL Services Commission said it will actively introduce market-friendly policies and respond to market concerns in a timely manner.All policies that have a significant impact on the capital market should be coordinated with the financial regulatory authorities in advance to maintain the stability and consistency of policy expectations.The central bank said monetary policy should be proactive, new loans should maintain moderate growth, vigorously support micro, small and medium-sized enterprises, firmly support the development of the real economy, and keep the economy operating within a reasonable range.Wang Qing, chief macro analyst at Orient Jincheng, said that although there was downward pressure on the domestic economy, it was not urgent enough to prompt regulators to cut interest rates twice in three months.Although the Federal Reserve started the process of interest rate hike, but the domestic monetary policy will still be “dominated by me”, not only will not follow up overseas tightening, and there is marginal easing space, it is expected that the People’s Bank of China may lower the MLF interest rate by 10 basis points in the second quarter, while implementing comprehensive reserve requirement ratio reduction again.(Journalist Pan Fuda)