The Federal Reserve Open Market Committee unanimously raised the fed funds rate today by 0.25% to a range of 4.75-5.00%. Starting from 0.00% just a year ago, this continues to be the quickest and most robust hiking cycle since the early 1980s.
The formal statement language, importantly, saw removal of the reference to “ongoing” rate increases, replaced by “will closely monitor” and “anticipates that some additional policy firming may be appropriate.” It also described the U.S. banking system as “sound and resilient,” and that credit conditions are likely to weigh on economic activity—no doubt recently added. Also, that job gains are running at a “robust” pace. Overall, this was taken as a bit dovish for a hike, and stocks turned higher immediately upon its release. In the Fed’s updated Summary of Economic Projections (SEP) or ‘dot plot’ today, fed funds rates projections were little changed, with the 2023 median level just above 5.0%, 2024 remaining around 4.0%, and 2025 down toward 3.0%—all implying normalization.
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