The FOMC and its members have repeatedly mentioned the need to raise their key interest rate to try to at least slow down the inflation problem currently threatening the economy.
They raised rates in May and will continue to do so for at least the next two meetings. It was a 0.50% hike, an already considerable increase, and yet there is the possibility of a larger increase if the economic situation continues to deteriorate.
Also approved was a plan to begin a June this year, a reduction of the Central Bank’s balance sheet, which currently stands at 9 trillion.
It is expected that the FOMC will continue at this pace and reach about 2.5%/3% by the end of the year. Especially considering the general agreement from its members to support a key interest rate increase, something relatively rare at Central Banks.
The fact that it was not a higher than expected rise of 0.75% was well received by investors. With the main indexes reacting positively.
The biggest concern for both the FOMC and investors is that this hike will lead to an economic slowdown. The worry is that it’s such a slowdown that it could lead to a recession.
It remains to be seen whether this sentiment will hold, with the steady rise in inflation and the geopolitical conflict having consequences on several economic fronts.
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