US Central Bank Hikes Benchmark Rate by 75 bps, Fed’s Largest Increase Since 19942 min readReading Time: 2 minutes
The U.S. Federal Reserve raised the federal funds rate by 75 basis points (bps) on Wednesday, and it was the largest increase since 1994. According to the Fed member’s expectations, the central bank will likely add another 1.5 percentage points by the year’s end.
Fed Hikes Rate by 75 bps, Global Markets See Slight Rebound
America’s central bank raised the interest rate by 75 bps on June 15, as it was the highest increase in decades. The last 75 bps rate hike took place during Alan Greenspan’s tenure, as the central bank’s former lead shocked the nation with the drastic increase.
“Inflation remains well above our longer-run goal of 2% over the 12 months ending in April, total PCE prices rose 6.3%, excluding the volatile food and energy categories,” Jerome Powell, the U.S. central bank’s current chair said on Wednesday in a statement.
The nineteen Fed officials believe the bank will end 2021 with a benchmark rate of 3.4%. This means the central bank will increase the rate by 1.5% over the next few months according to the Fed’s “dot plot.”
The Federal Open Market Committee’s (FOMC) statement explains that the U.S. economy looks positive but there’s still some uncertainty in the air. “Overall economic activity appears to have picked up after edging down in the first quarter,” the FOMC said.
“Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures,” the Fed’s FOMC statement further explains.
U.S. equities market jumped on the news and the major stock indexes erased some of the losses felt before the Fed announcement. However, the Dow Jone Industrial Average has been running sideways since the announcement.
Bitcoin (BTC) remained unchanged after the announcement holding just above the $21K zone. The entire crypto economy at $982 billion did not flinch after the announcement as it seems the Fed announcement was priced into crypto and stock markets.
An ounce of fine gold spiked in value, gold is up 1.22%, and an ounce of silver is up 2.84%. At the time of writing, an ounce of gold is valued at $1,830 per unit following the U.S. central bank’s announcement on Wednesday.
What do you think about the Fed increasing the benchmark rate by 75 bps on Wednesday? Let us know what you think about this subject in the comments section below.