- The FOMC raised the target rates for the federal funds rate by 75 basis points.
- Federal Reserve Chairman Jerome Powell has indicated that “unusually large” increases may be appropriate in future meetings.
- Powell also said a period of economic downturn will be needed to restore price stability.
The Federal Open Markets Committee (FOMC) raised his goal interest rate for the federal funds rate of 75 basis points, or 0.75%, on Wednesday marking the highest consecutive rate increase since the 1980s.
FOMC and Federal Reserve Chairman Jerome Powell addressed rate hike in usual follow-up press conference.
Powell began by noting that spending and output indicators both slowed, but attested that labor market conditions were still strong.
In addition, Powell touched on a myriad of topics, including continuing supply chain constraints, recession fears, continued quantitative tightening, the war in Ukraine, and provided insight into possible future action. from the FOMC regarding mounting inflation pressures.
“Another unusually large increase may be appropriate at our next meeting,” Powell warned.
At last month’s FOMC meeting, Powell Explain that the intention of the committee is not to cause a recession. However, allusions at this meeting to the continued headwinds facing borrowers in the economy via rising rates leave little room for positive economic growth. In fact, the president explained that a recession is more than a probability –– it’s likely to happen due to continued rate increases.
Powell has made it clear that further upside is likely, and the FOMC believes the economy needs to slow for the US to regain any hope of price stability.
“This process will likely involve a period of below-trend economic growth and an easing of labor market conditions,” he explained. “We believe it is necessary to slow growth.”
Prior to the press conference and announcement of the rate increase, the price of bitcoin rose above $22,000, briefly touching $23,000. Peer-to-peer digital money was exchanging hands at $22,800 at the time of reporting.