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Federal Reserve to Continue Raising Interest Rates

NFT, crypto
Published 1 year ago
ID #1987
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Federal Reserve to Continue Raising Interest Rates
NFT, crypto,
Published 1 year ago

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The simple words of Powell shook investors, in fact, stocks fell from their highs minutes after the Federal Reserve's meeting minutes showed that the central bank will continue to be aggressive in raising rates to control high inflation.

The Federal Reserve began the year without healing its wounds from 2022. The monetary authority declared in Washington a few minutes ago that its officials are "committed to fighting inflation and expect interest rates to remain higher until further progress is made." This according to the minutes published Wednesday of the central bank's December meeting.

Participants generally observed that it would be necessary to maintain a restrictive policy stance until incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which would likely take some time. In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against premature relaxation of monetary policy.

The increase ended a streak of four consecutive three-quarter point rate hikes, while taking the target range for the benchmark federal funds rate to 4.25%-4.5%, its highest level in 15 years. Officials also said they would focus on data as they progress and see the need to maintain flexibility and optionality.

Powell's speech hits markets again

The simple words of Powell shook investors, in fact, stocks fell from their highs minutes after the Federal Reserve's meeting minutes showed that the central bank will continue to be aggressive in raising rates to control high inflation.

It will all be limited to two possible scenarios

Current prices also indicate the possibility of a small rate cut by year-end, with the funds rate landing in a range of 4.5%-4.75%. However, Fed officials have repeatedly expressed doubts about any easing of policy in 2023.

The minutes noted that officials are grappling with monetary policy risks in two different scenarios one, that the Fed does not keep rates high enough for long enough and allows inflation to worsen, similar to the experience in the 1970s; and two, that the Fed keeps restrictive policy too long and ends up slowing the economy too much, potentially placing the greatest burdens on the most vulnerable segments of the population. The Fed seems to prefer the second scenario.

Federal Reserve, interest rates, inflation, monetary policy, economic growth, Powell, stocks



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    NFT, crypto
    Federal Reserve, Interest Rates, Inflation, Monetary Policy