Federal Reserve Raises Interest Rate Another .75%

Washington, DC, July 28, 2022-The Federal Reserve continued a sprint to reverse its easy-money policies by approving another unusually large interest rate increase and signaling more rises were likely coming to combat inflation that is running at a 40-year high, according to the Wall Street Journal.

“Officials agreed unanimously Wednesday to lift their benchmark federal-funds rate to a range between 2.25% and 2.5%. But markets rallied after the meeting because Fed Chairman Jerome Powell offered fewer specifics about the magnitude of upcoming rate rises and hinted at an eventual slowdown.

“Stocks rallied after Mr. Powell’s news conference. The S&P 500 gained 2.6% to close at 4023.61. Yields on the benchmark 10-year Treasury note fell to 2.79%.

“Given Mr. Powell’s insistence that the Fed has to cause slower growth and accept rising recession risks to bring down inflation, “it is a bit surprising that all assets reacted in such an exuberant manner,” said Michael de Pass, global head of linear rates trading at Citadel Securities.

“Mr. Powell said Wednesday it was too soon to say whether the Fed would dial down the size of its rate increases to a half-percentage point or a quarter-percentage point at its next meeting in September. But he said that at some stage, it would be appropriate to slow the pace of rate increases to assess their cumulative impact on the economy.

“‘These rate hikes have been large, and they’ve come quickly,’ Mr. Powell said, referring to the Fed’s four consecutive rate increases since March. ‘And it’s likely that their full effect has not been felt by the economy, so there’s probably some significant additional tightening in the pipeline.’

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