The Federal Reserve raised its benchmark interest rate by 0.25 percentage points to a target range of 4.5%-4.75%, the highest since October 2007. This is the eighth increase in a process that began in March 2022, and is intended to bring down inflation which is still running near its highest level since the early 1980s. Markets were looking for signs that the Fed would be ending the rate increases soon, but the statement provided no such signals. Fed Chairman Jerome Powell acknowledged that “the disinflationary process” had started, but noted that it would be “very premature to declare victory or to think we really got this.” The Fed is also reducing its bond portfolio, and markets are betting that the terminal rate is closer to 4.75%. The Fed is likely to make one more quarter-point increase in March, and Powell said it's “possible” that the funds rate could stay lower than 5%, but unlikely to cut rates this year unless inflation comes down more rapidly.
https://www.cnbc.com/2023/02/01/fed-rate-decision-february-2023-quarter-point-hike.html
2 comments:
I think that it is a smart idea to continue with interest rate increases to counter inflation. I agree with Chairman Powell's statement that it is too early to declare victory. We have seen the impact that increasing interest rates have had on inflation and I think it would be beneficial to continue with rate hikes at the next Fed meeting.
There is still a ways to go in terms of reaching the Fed's goal of two percent inflation. However, it was probably a smart decision by the Fed to only raise rates by .25 basis points at their latest meeting as markets are starting to feel the effects of these continued rate hikes. The downside to lowering the interest rate hikes is that the process of bringing inflation back down to the Fed's target will likely take more time.
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