FED HIKES INTEREST RATE BY 0.25% TO 5.25%

The Federal Reserve announced on Tuesday that it will raise the federal funds rate by 25 basis points to a range of 5% to 5.25%, as expected. However, the central bank did not indicate any further rate hikes in the near future. The forward-looking language used by the Fed is reminiscent of its approach in 2006, when it mounted one last rate hike during that campaign.

The Fed’s decision to continue quantitative tightening at its current pace is also in line with market expectations. Despite economic turbulence, the central bank seems to be confident in its ability to maintain stability while gradually normalizing monetary policy.

This announcement comes after the Fed’s two-day meeting and was a unanimous decision. While the rate hike was largely priced in by the markets and economists, the lack of further rate hikes signaled by the Fed is likely to be seen as a relief to investors.