Fed Makes Historic Move Raising Rates 75 Basis Points: Signals More Pain Well Into 2023
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The Federal Reserve made history on Wednesday, approving a third consecutive 75-basis-point hike. Fed Chair Jerome Powell says, “Today the FOMC raised its policy interest rate by three quarters of a percentage point and we anticipate that ongoing increases will be appropriate."
The supersized hike takes the central bank's benchmark lending rate to a new target range of 3% to 3.25%. That's the highest the fed funds rate has been since the global financial crisis in 2008.
It was largely anticipated by the market, but the key is what's next? FOMC officials also released updated economic forecasts for the first time since June showing a more forceful path ahead than previously anticipated to curb 40- year highs in inflation. They’re signaling rate hikes will continue well into 2023 to get inflation down to around 2%.
Tommy Grisafi, Advance Trading says, “It looks like the Fed signaling that they need to keep raising rates. We inflation's a problem not only in United States but all over the world. So the Fed sent the signal they're raising rates .75 and they're planning on raising another .75 here in a few months.”
Going into the FOMC announcement CME Fed funds futures gave 82-percent odds for a 75-basis-point increase. Odds were also 60% for another 75-basis point rise in November and a 50-point rise in December. If that unfolds, the target range would be at 4.25% to 4.5% compared with the current 2.25% to 2.5% level.
Economic analysts are expecting the Fed to raise interest rates to a high level and keep them there for an extended period to cool off the economy. A CNBC Fed survey forecasts Interest rates to peak at 4.26% in March. Nearly 60% of respondents are concerned about the Fed going too far and causing a recession.
