The Federal Reserve on Wednesday hiked rates of interest by 0.75 percent to increase interest rates for the 4th time in succession as central bankers carry on the fight against inflation despite increasing concerns regarding the possibility of a recession in the coming year.
“In determining the rate of future increases within the target range The Committee will be taking into consideration the gradual tightening of monetary policies as well as the lags in how monetary policy impacts the economy and inflation and also financial and economic changes,” bank officials said in a press release after this Fed’s policy gathering.
The rate increase was expected because officials have not shown any signs of easing off from this rate-hike campaign, which is the largest program since the past decade. The Fed has raised rates six times in the past year, increasing its Federal Funds Rate to between 3.75 and 4 percentgenerally regarded as “restrictive” zone that is likely to slow the pace of economic growth. Now , the question is how and when officials are likely to decide to reduce or even stop their policy, particularly in light of increasing concerns that they could overcorrect or exceed their capacity to determine if their policies are working.The forecasts of the Fed show an increase of about one-half of a percentage point during the December meeting which will be followed by a lower increase in 2023’s early stages.
Market volatility continues to rage following Fed announces a second rate increase
The volatility dominated U.S. markets after Wednesday’s interest rate announcement, with market participants watching the Dow Jones industrial average briefly rising before turning around and dipping 500 points lower.
Many economists had already predicted the possibility of an increment of 0.75 percent in the federal funds rate however Federal Reserve Chair Jerome H. Powell has also said that additional hikes are likely to come in the near future.
The Dow finished the day with a loss of over 1.5 percent. In spite of a brief boost following the Fed’s announcement on the matter, it was a tumbling S&P 500 index shed 2.5 percent, and the tech-focused Nasdaq fell over 3.3 percent.
