By Ketki Saxena
Investing.com – The US Federal Reserve has raised interest rates by 25 basis points, taking its benchmark rate to 4.5%-4.75%. The Fed also announced that “ongoing increases” to the benchmark rate would be appropriate - the plural implying more than one future rate hike, in March and possibly again in May.
At the moment however, interest rate futures are not completely pricing in another quarter-point hike for March.
Today's move, which had been almost 100% priced in by money markets, marks a downshift in Fed policy, taking it a notch down from December’s 50 bps hike and the four consecutive 75 bps rate hikes prior. The Fed also said that “inflation has eased somewhat but remains elevated”
In a press release accompanying the announcement, the Fed further noted, “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals”.
Priya Misra at TD (TSX:TD) Securities commented, “So far slightly hawkish message -- inflation has eased but remains elevated. They hiked 25bp and likely will hike a few more times in their base case. Should move front end rates higher. Not good for risk assets so long end might keep a bit of a bid. Focus on whether Powell talks about his current view on the terminal rate and fin conditions at the presser.”
Guidance on quantitative tightening meanwhile remains unchanged: “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”