The Federal Reserve (Fed) ended its September interest rate decision meeting on Wednesday (21st) and raised its benchmark interest rate by 3 yards to a range of 3.0% to 3.25%. to the highest level since before the 2008 financial crisis.
The Federal Reserve on Wednesday announced a 3-yard rate hike, maintaining the largest single rate hike since 1994. At the same time, the Fed also raised the interest rate on excess reserves (IOER) by 3 yards to 3.15% from the previous 2.4%.
The Fed said in its latest statement that FOMC members expect continued interest rate hikes to be appropriate, with a strong commitment to bringing inflation back to its 2% target.
According to the newly released interest rate point chart, most voting members agreed to raise the benchmark interest rate above 4.25% this year, indicating that November may raise interest rates for the fourth consecutive time by 3 yards. The Fed expects this cycle of rate hikes to peak next year, and the median terminal rate forecast was revised up to 4.6%, higher than the previous market forecast of 4.5%.
The Fed also updated the economic outlook, with officials unanimously forecasting that U.S. gross domestic product (GDP) growth will slow sharply to 0.2% in 2022, well below the 1.7% forecast in June, while GDP growth in 2023 and 2024 will slow sharply to 0.2%. The rate forecasts were revised down to 1.2% and 1.7%, respectively.
At the same time, with the Fed raising interest rates aggressively, the Fed will estimate the unemployment rate next year to 4.4% from the current 3.7%, and reduce the overall personal consumption expenditures price index (PCE) forecast for this year to 5.4%. Core inflation, which excludes food and energy, was revised down to 4.5% this year, with headline inflation expected to fall back to the Fed’s 2% target in 2025.
U.S. stocks fell on Wednesday after the Federal Reserve released its latest monetary policy decision.Dow JonesReversing earlier gains, 2-year vs. 10-Year U.S. Treasury YieldThe curve has flattened, with the 2-year U.S. Treasury yield breaking above 4.1% for the first time since 2007.