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Home Economy

Fed raises rates by 50 basis points

December 14, 2022
Reading Time: 1 min read
Fed report: Banking system remains strong, assessing of fintech risk ramps up

The Federal Open Market Committee today announced it would raise the target range for the federal funds rate by 50 basis points to 4.25% to 4.5%. The increase marks the seventh rate hike this year but also represented a slowdown from the previous four hikes, when the FOMC raised the rate by 75 basis points each time. The committee reiterated that it expects further increases will be necessary to bring long-term inflation down to the target range of 2%.

“Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path.,” Federal Reserve Chairman Jerome Powell said.

The FOMC’s median projection for the appropriate rate level by the end of 2023 is now 5.1%, which is half of a percentage point higher than the September projection, Powell said. Looking further out, the median projection is 4.1% for the end of 2024 and 3.1% at the end of 2025.

“We’ve raised (the rate) 425 basis points this year and we’re into restrictive territory,” Powell said. “It’s now not so important how fast we go. It’s far more important to think, ‘What is the ultimate level?’ And then at a certain point the question will become, ‘How long do we remain restrictive?’” FOMC will meet again Jan. 31-Feb. 1, 2023.

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