On Wednesday the Federal Reserve kept its promise and raised its benchmark interest rate again by 0.75% in an effort to control inflation. This increase puts the rate at 2.5%, close to the 2018 levels.
Expected by a large majority of investors, this decision did not come as a big surprise. It will however affect some markets negatively, especially real estate which has a heavy reliance on cheap money for borrowing.
In order to remain flexible, their statements decided to keep vague language about the Fed’s next decisions. They will keep an eye on economic developments and decide accordingly, although they consider the possibility of another 0.75% increase if inflationary conditions continue.
He also mentioned that they believe they are close to the Fed’s target. This hint that they might slow the rise in the benchmark interest rate was seen as good news by investors.
He downplayed the news of a recession and deemed a slowdown in growth necessary to reduce inflation. He preferred to frame the economic slowdown as transitory and not a recession.
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