The Blubber

The Federal Reserve has hiked rates by 25 BPS.

The Federal Reserve has approved an interest rate hike, which brings benchmark borrowing costs to their highest level in more than 22 years.

1. The Federal Open Market Committee (FOMC) raised its funds rate by a quarter percentage point to a target range of 5.25%-5.5%. The midpoint of this range would be the highest level for the benchmark rate since early 2001.
2. Financial markets had anticipated this rate hike, and it received unanimous approval from voting committee members.
3. Policymakers indicated that two rate hikes are coming this year, but markets are pricing in a possibility that there won't be any more moves this year.
4. The post-meeting statement highlighted a data-dependent approach for future moves rather than a set schedule.
5. Economic growth has been upgraded to "moderate" from "modest" despite expectations for a mild recession ahead. Inflation is still described as "elevated," and job gains as "robust."
6. The Fed has raised rates 11 times since March 2022 as part of its tightening process.
7. Fed Chairman Jerome Powell expressed concerns about high inflation and suggested the likelihood of more rate hikes.
8. News on the inflation front has been encouraging, with the consumer price index rising at a slower pace compared to a year ago.
9. Economic growth has remained resilient despite the rate hikes, with second-quarter GDP growth tracking at 2.4% annualized rate.
10. Employment has also held up well, with nonfarm payrolls expanding by nearly 1.7 million in 2023, and the unemployment rate at 3.6%.
11. Along with the rate hike, the committee plans to continue cutting the bond holdings on its balance sheet.

These points indicate the Federal Reserve's efforts to manage inflation and economic growth through interest rate adjustments and other monetary policy measures. The Fed is closely monitoring economic data to determine future moves and is currently focused on managing inflationary pressures while ensuring economic stability.