May 20, 2022

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Stocks Rise After Fed Rate Decision: Live Updates

Stocks Rise After Fed Rate Decision: Live Updates




Federal funds target rate

Federal or state funding

target rate

Federal funds target rate

Federal or state funding

target rate

Federal or state funding

target rate


The Federal Reserve raised interest rates by half a percentage point and announced a plan to reduce its massive holdings of bonds, crucial measures aimed at curbing the fastest inflation in four decades.

Wednesday’s move marks the Fed’s largest rate increase since 2000, President Jerome H. Powell told a post-meeting press conference that additional increases of half a percentage point would be “on the table” at upcoming Fed meetings.

By shrinking its balance sheet of about $9 trillion while raising interest rates dramatically, the Fed charted a path to withdraw rapid support from the economy. Twin policies are more likely to bounce back through markets and the economy as money becomes more expensive to borrow.

The rapid decline is a sign that the central bank is getting serious about calming the economy and the job market as rapid inflation continues and officials are nervous about becoming more permanent. Prices soared in Fastest pace in 40 years For months now.

“Inflation is very high, and we understand the hardships it is causing, and we are moving quickly to bring it down again,” Powell said at his press conference on Wednesday.

He later added, “There is a general feeling in the committee that an additional 50 basis point increase should be on the table in the next two meetings.”

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Policymakers spent most of 2021 hoping that inflation would ease on its own as supply shortages abated and as the economy stabilized after early pandemic disruptions. But normal life has not yet returned, and inflation is accelerating. Now, a new pandemic is linked Lockdowns in China and the war in ukraine It increases the prices of commodities, food and fuel. At the same time, there is a shortage of workers and Wages are rising Quickly in the United States, fed on Service price hike Where consumer demand remains strong.

“The shutdown in China is likely to exacerbate supply chain disruptions,” the invasion of Ukraine “and related events create additional upward pressure on inflation and are likely to impact economic activity,” Federal Open Market Committee statement Lamy said.

With the shocks continuing to undermine global supplies, Fed officials decided they no longer had the luxury of waiting for inflation to moderate on its own. However, Powell dismissed the bolder rate increase idea. While some officials have suggested a 0.75 percentage point move could occur, Powell said Wednesday that such a large increase “is not something the committee is actively considering.”

Stocks rose on Wall Street after Powell’s comments, which calmed investors who were beginning to worry that the war against inflation could push the economy into recession. The Standard & Poor’s 500 Index jumped more than 2.3 percent in afternoon trading.

“Over the past week, market watchers have begun to consider the possibility of a 75 basis point increase, although it has been a long way off,” said Emily Bowersock-Hill, CEO of Bowersock Capital Partners, a financial management firm. Ms Bowersock Hill said the “euphoria” in the stock market on Wednesday also reflected the fact that the Federal Reserve hadn’t said anything investors were not already expecting.

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Determining how quickly to remove policy support is a risky exercise. Central bankers hope to act decisively enough to stop price hikes, without curbing growth so hard that they are pushing the economy into a painful recession. distance Engineering a so-called soft landing is likely to be a challenge.

Mr. Powell nodded at this equilibrium, saying, “I expect this to be very difficult, and it will not be easy.” But, he said, “I think we have a good chance of getting a soft or soft landing.”

He later indicated at the press conference that he believed the Fed had a “good chance of restoring price stability without a recession.”

The Fed plans to Shrink its balance sheet Starting in June, allow securities to mature without reinvesting. On Wednesday, it said it would eventually allow up to $60 billion in Treasury debt to expire each month, along with $35 billion in mortgage-backed debt. This plan will be fully phased in from September.

The Fed’s plan to reduce its holdings is likely to take power out of financial markets and could help cool the housing market as it raises long-term borrowing costs, reinforcing the effect of the central bank’s interest rate increases. Expected moves from the Federal Reserve are starting to push mortgage rates higher.