Fed Impoes Big Rate Hike To Stem Rise In Inflation

The Federal Reserve on Wednesday raised interest rates by half of a percentage point and announced the start of reductions to its $9 trillion balance sheet as the US intensifies efforts to bring down inflation, Ann Saphir reported for Reuters.

Photo Insert: The Fed began its current round of policy tightening in mid-March with a quarter-percentage-point rate hike.

Fed policymakers have widely telegraphed a double-barreled decision that would lift the Fed's short-term target policy rate to a range between 0.75% and 1%, and set in motion a plan to trim its portfolio of Treasuries and mortgage-backed securities (MBS) by as much $95 billion a month.

The policy statement was released at 2 p.m. EDT (1800 GMT or 2 a.m., Thursday, in Manila) following the end of the Fed's latest two-day meeting.

Markets have priced in further rate increases through this year and into next, including three more half-percentage-point hikes, as traders bet the central bank moves much more quickly than it had anticipated it would in March to get borrowing costs up to where they will start actively curbing inflation.

With no fresh Fed economic or policy rate projections due until the central bank's June meeting, most clues on how far and how fast it is prepared to go came from Fed Chair Jerome Powell's news conference.

The Fed began its current round of policy tightening in mid-March with a quarter-percentage-point rate hike, smaller than many policymakers had wanted given that inflation had hit a 40-year high but calibrated so as not to inject more uncertainty into global markets roiled by Russia's Feb. 24 invasion of Ukraine.

In the weeks since that decision, inflation has gained new steam as the war pushed up oil and food prices, and China's strict lockdowns to combat the spread of COVID-19 further disrupted supply chains.

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