The Federal Reserve raised interest rates by a quarter of a percentage point and laid out an aggressive plan to push borrowing costs to a cap next year on fears of high inflation and the war in Ukraine. overcome the risk of the coronavirus pandemic.
Without a surprise move, the US central bank is projecting a rate hike of the equivalent of a quarter of a percentage point at every remaining policy meeting this year, which should push up the federal funds rate. target state to range from 1.75pc to 2pc by the end of 2022.
At the end of next year, the policy rate is expected to be 2.80pc, well above the 2.40pc that officials now feel will slow the economy.
However, a slowdown may be on the way. Fed policymakers slashed their economic growth estimate for 2022 to 2.8 points, from 4pc expected in December, as they begin to ease new risks to the economy the global economy has to face.
“The Russian invasion of Ukraine is causing enormous human and economic hardship.
“The effects on the US economy are highly uncertain, but in the near term, the invasion and related events could add further upward pressure on inflation and weigh on economic activity.” economy,” the Fed said in a statement that had long since dropped the direct reference. coronavirus is the most immediate economic risk facing the country.
The statement marked the end of the Fed’s all-out battle against the pandemic, as it raised the federal funds rate and pledged “continuous increases” to contain the highest inflation rate in 40 years.
The interest rate path outlined by policymakers in the new projections is tougher than expected, reflecting the Fed’s concerns about inflation moving faster and risking becoming more persistent than expected. , while also risking the central bank’s hopes for an easy shift in emergency policies in place to combat the fallout from the pandemic.
On Wall Street, the S&P 500 index rallied after the statement release and trading forecasts rose about 0.8 percentage points.
The yield on the benchmark 10-year Treasury note rose to 2,212pc, the highest since May 2019, and the yield on the two-year Treasury note rose to 1.9890pc, the highest since June 2019. The US Dollar Index moved from a small loss to a small gain.
https://www.independent.ie/business/world/federal-reserve-raises-rates-for-the-first-time-since-2018-41455375.html Federal Reserve raises interest rates for the first time since 2018