According to Fed minutes on Wednesday (May 25, 2022), rate hikes are affirmed to increase 0.50 percent in June and July.Fed (May 25, 2022)
The Fed minutes revealed a strong consensus for additional 0.50 percent adjustments, planned for June 14-15 and July 26-27, 2022.
Last Meeting (May 4, 2022)
At the last Fed meeting, most participants agreed that 50 basis point increments would be reasonable in the next couple of sessions. Thus, officials increased short-term interest rates by 0.50 percent to a target range (0.75 percent to 1.00 percent). This increment is to reduce inflation. Higher interest rates make borrowing more expensive. Moreover, it can reduce consumption, allowing corporations to raise prices.
Following the May 4, 2022 rate hikes, the Fed chairman informed that further 0.50 percent rate hikes should be on the table for the next two meetings.
Fed policymakers would have to continue hiking rates beyond estimates for the neutral rate of interest, which is not restrictive to economic growth. This forecast predicts that interest rates will increase over 2.5 percent at some point during this cycle.
Thus, inflation still remained the Fed’s top priority. It was hindered by Russia’s invasion of Ukraine and China’s COVID-related shutdowns. Both disasters are causing disruptions in the worldwide supply chain. It can pushed up costs. According to Fed officials, those pressures may relax at some time, but the timing and scale are uncertain.
However, all officials on the committee agreed to the 0.50 percent hike in May 2022, also the plan to begin decreasing the Fed’s $9 trillion balance sheet on June 1.
As we know that the Russia- Ukraine war and the Covid-19 situation are not unraveling, the inflation still continues to increase. Therefore, the central bank of America tries to get rid of this problem. Finally, increasing rate hikes are used to solve the situation.
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