US Fed hikes rates by 25 bps: Key highlights of FOMC statement

The US central bank also issued economic forecasts. Here are the key highlights of the US Fed’s statement:

– US Fed hikes interest rates by 25 bps to 5.15 per cent, effective May 4, 2023, as it continues to battle against inflation

– The Federal Open Market Committee (FOMC) decided to increase the target range for the federal funds rate from 5 to 5-1/4 percent

The US banking system is strong and resilient. The tighter credit conditions for households and businesses are likely to have an impact on economic activity, hiring and inflation. The extent of these effects remains uncertain. Committee remains extremely mindful of inflation risks: Fed statement

– Reasons for the growth: “Economic activity expanded at a modest pace in the first quarter. Job gains have strengthened in recent months, and the unemployment rate remains low. Inflation remains high.” said in the statement.

The Committee will continue to reduce its holdings of Treasury securities and agency loans and agency mortgage-backed securities, as described in its previously announced plans.

In determining the extent to which additional policy setting may be appropriate to bring inflation back to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, with which monetary policy affects economic activity and inflation. and economic and financial development.

The Committee will be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could hinder the achievement of the Committee’s objectives. The Committee’s assessment will take into account a wide range of information, including labor market conditions, inflationary pressures and inflation expectations, and financial and international developments.

The Fed plans to reduce the balance sheet each month by $60 billion for Treasuries and $35 billion for mortgage-backed securities.

– Jerome H. Powell, Chairman, in voting for monetary policy action; John C. Williams, Vice President; Michael S. Barr; Michelle W. Bowman; Lisa D. cook; Austin D. Golsby; Patrick Harker; Philip Ann Jefferson; Neel Kashkari; Laurie’s Logan; and Christopher J. Waller.

Operate standing repurchase agreements with a minimum bid rate of 5.25 percent and a total operating limit of $500 billion.

– Operate overnight reverse repurchase agreements with an offer rate of 5.05 percent and a per-counterparty limit of $160 billion per day.