Market News
- The United States Federal Open Market Committee (FOMC) announced on Wednesday that there will be an interest rate hike of 50 basis points.
- It is expected that there will be 5 more rate adjustments throughout this year.
- Following the confirmation of the 50 basis-point hike, risk assets including stocks and crypto rallied in the immediate aftermath.
The United States Federal Open Market Committee (FOMC) announced on Wednesday that there will be an interest rate hike of 50 basis points, which is around 0.5%. This is the second-rate adjustment this year, and it is expected that there will be 5 more throughout this year. The previous adjustment made by the Federal Reserve was in March, and was a 0.25% increase.
The markets braced for Wednesday’s interest rate hike, which is the steepest since 2000. A moderate immediate reaction was expected given that Jerome Powell, the Fed chair, had already hinted earlier in April that there could be a 50 basis-point adjustment.
Following the confirmation of the 50 basis-point hike, risk assets including stocks and crypto rallied in the immediate aftermath.
The Fed also announced in its policy statement on Wednesday that it will begin selling off some of its balance sheet of mortgage-backed securities and bonds which has doubled to $9 trillion since the start of the pandemic. The financial markets may experience a temporary shock as a result of the balance sheet selloff by the Fed. This could also have longer-term negative effects.
Powell held a press conference after the committee vote and assured Americans that the Fed is “moving expeditiously” to bring inflation down. He also stated that the central bank has a broad sense that 50 basis-point increments are appropriate to bring inflation down to its target range.
Powell said later in the press conference that the committee is not considering 75 basis-point hikes, indicating that future rate adjustments could be 25 basis-points.
