The Federal Reserve raised the federal funds rate by 75 basis points (bps) on Wednesday, the largest increase since 1994. members expect that the central bank will likely add another 1.5 points by the end of the year.
Fed Hikes 75 bps, Global Markets See Slight Rebound
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- The US central bank raised rates by 75 bps on June 15, its highest hike in decades. The last 75 bps rate hike came during Alan Greenspan’s tenure, when the former head of the central bank shocked the public with a significant rate hike.
- “Inflation was well above our longer-term target of 2% in the 12 months through April, with total PCE prices up 6.3%, excluding the volatile food and energy categories,” Jerome Powell, the current chairman of the U.S. central bank said in aon Wednesday. statement .
- Nineteen Fed officials believe the bank’s benchmark rate will end 2021 at 3.4%. This means the central bank will raise rates by 1.5% in the coming months, according to the Fed’s “dot plot.”
- Federal Open Market Committee (FOMC) statement explains that while the U.S. economy looks positive, there are still uncertainties.” The FOMC stated that “overall economic activity appears to be picking up after declining in the first quarter.”
- “Job growth has been strong in recent months and the unemployment rate has remained low. Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, higher energy prices, and broader price pressures,” the Fed’s FOMC statement further explained.
- The U.S. stock market rallied sharply on the news, with the major stock indexes eliminating some of their pre-FRB announcement losses. However, the Dow Jones Industrial Average has remained flat since the announcement.
- Bitcoin (BTC) was unchanged after the announcement holding just above the $21K zone; the entire $98.2 billion crypto economy did not flinch after the announcement as the Fed announcement seemed to be factored into the crypto and stock markets.
- An ounce of pure gold surged, with gold up 1.22% and an ounce of silver up 2.84%. At the time of writing, an ounce of gold is valued at $1830 per ounce following Wednesday’s U.S. central bank announcement.
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