The US Federal Reserve’s Federal Open Market Committee (FOMC) announced to increase the rate by 25 basis points to tame inflation on Wednesday with what may be seen as the last in a historic series of interest rate hikes and heightened attention to credit and other economic risks.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

The Fed policy meeting comes at a time when central banks around the globe are struggling to balance red-hot inflation with economic growth.

Here are the five takeaways from the US Fed FOMC meeting decision:

1) The US central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5-5.25 per cent range, as expected by financial markets, but in doing so dropped from its policy statement language saying that it ‘anticipates’ further rate increases would be needed.

2) "We're closer, or maybe even there," US Fed Chair Jerome Powell said of the endpoint of rate increases that have boosted the Fed's policy rate by a full 5 percentage points in the 10 meetings since March 2022.

3) Inflation and the impact of a credit tightening Fed officials feel is still evolving in the wake of both higher interest rates and a financial sector rattled by the recent failure of three US banks. Powell said inflation remains the chief concern, and too soon to say with certainty that the rate-hike cycle is over.

4) US stocks initially held onto gains after the release of the Fed statement but fell later in the afternoon and closed lower. Yields on US Treasury securities dropped sharply, while the dollar weakened against a basket of trading partner currencies.

5) According to CME Group, markets are currently pricing in an 82.7% chance the Fed will pause its rate hikes and maintain its current fed funds target range in June. Investors will watch out for the US jobs report on May 5 for an update on how rising interest rates are impacting the labour market.

With Reuters Inputs