The U.S. Federal Reserve raised the target range for the federal funds rate by 25 basis points to 4.5-4.75 percent, bringing the interest rate to a 15-year high.
Wednesday’s interest rate decision was largely expected, with traders pricing in such a rise ahead of time. Prior to the decision, the CME Group's FedWatch tool had shown a 99.8% likelihood of a 25 basis point increase.
The Fed aims to achieve maximum employment and inflation at a rate of 2% over the longer run, as it has previously stated. In an effort to reach those goals, the central bank is expected to continue increasing rates, even though Chair Jerome Powell said there were some signs of a cooldown.
"The labor market continues to be out of balance," he said at a press conference, adding that "substantially more evidence" will be needed to "determine that inflation is on a sustained downward path."
While a "disinflationary process has started," Powell stated, "it's at an early stage."
That said, the 25 basis point hike marks a slowdown from the pace of previous hikes, which have seen increases of 50 to 75 basis points since May 2022.
"Shifting toward a slower pace," Powell said, "will better allow the committee to assess the economy's progress to our goals." "We continue to anticipate that ongoing increases in the target range of the federal funds rate will be appropriate," he said.
Bitcoin's price whipsawed on the news, rising as much as 2% to $23,607 following the announcement.
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