Breaking News: U.S. Federal Reserve Raises Interest Rates

After the two-day meeting, as expected, the U.S. Federal Reserve raised the interest rates by another 0.25 points.

During the first quarter, economic activity experienced a slight growth while employment showed strong gains and unemployment rates remained low. However, inflation rates continue to be high.

USA’s current economic condition

The banking system of the United States is solid and durable. However, stricter credit conditions for households and businesses are likely to affect economic activity, hiring, and inflation negatively, the extent of which is currently uncertain. The committee is paying close attention to inflation risks.

To achieve maximum employment and a 2 percent inflation rate over the long term, the committee has decided to increase the federal funds rate target range from 5 to 5.25 percent.

The committee will carefully evaluate new information and its implications for monetary policy. When deciding whether additional policy firming is necessary to achieve the 2 percent inflation rate, the committee will consider the cumulative tightening of monetary policy, the delay in the effects of monetary policy on economic activity and inflation, and economic and financial trends.

The committee will also continue its previously announced plans to decrease its holdings of Treasury securities and agency debt, and mortgage-backed securities.It will continue to evaluate the economic outlook based on new information. It will adjust monetary policy as needed if risks arise that could hinder achieving its goals.

The U.S. economy growth slowed down significantly last year, and the inflation rate remains well above the 2% target. Jerome Powell said it has moderated since last year but is still very high.

Since March 2022, the U.S. Fed has gradually increased policy rates, causing federal funds’ rates to rise from near zero to 4.75% to 5.25% within a year. However, given the current banking crisis in the U.S., easing inflation, and slower economic growth, the Fed may have to reconsider its monetary policy stance soon.

Bitcoin hasn’t experienced any significant price movements since the announcement. The largest cryptocurrency by market cap is currently trading at $28,460 after a 1% drop in the past 24 hours and 4.2% on the weekly chart.

On Wednesday, Wall Street opened positively, with traders anticipating the Fed’s decision on key interest rates.

Will this be the last hike?

Powell said that during this meeting, the pause of interest rate hikes had not been discussed.

According to global financial firm Nomura, the U.S. Fed may take a break after the May meeting, and the first-rate cut may occur in March 2024, marking the end of the current hiking cycle.

In contrast, ING has a different prediction, forecasting a 100 bps rate cut from the Fed this year. It anticipates two 50 bps rate cuts, one each in the November and December FOMC meetings.

ECB meeting

The European Central Bank is expected to announce its monetary policy outcomes after its meeting on May 4th.

According to Reliance Securities, while the headline inflation rate in the eurozone rose in April, core price growth unexpectedly slowed, leading to a potentially uncertain outlook.

Despite this, bank officials are still emphasizing the importance of controlling inflation and promoting further interest rate increases.

Author

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.