According to Chair Jerome Powell, the US Fed will likely raise interest rates this month by 50 basis points.
Federal Reserve Chair Jerome Powell has implied that the US apex bank will increase interest rates by 50 basis points in December. The Fed arrived at this fiscal decision in its eighth and final meeting of the year. Speaking on the projected hike of interest rates by 50 basis points, Powell explained:
“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
In addition, the Fed Chair, who was speaking at an event in Washington, DC, added that “time for moderating the pace of rate increases may come as soon as the December meeting.”
Powell also stated that the terminal rate would be higher than previously projected in the Federal Open Market Committee’s latest economic projections. These projections. Which occurred in September, predicted that rates would go as high as 5%.
Observers May Welcome Increase of Interest Rates by 50 Basis Points
Increasing rates by 50 basis points would see a short-term climb to a target range of 4.25 to 4.50%. Furthermore, this development should see warm reception among observers and analysts after increasing calls for Fed mediative action to preempt a recession. In the weeks leading up to the Fed announcement, several analysts had implored the central bank to cut down on its hike intensity. According to these analysts, the previous rate hikes of 0.75 basis points were biting down hard on the economy and creating a crunch. As a result, these observers argued that the Fed’s attempts to stem runaway inflation might inadvertently bring about a full-blown recession. Notably, Tesla CEO Elon Musk became the latest major voice to decry the Fed interest rate policy when he took to Twitter to express his disapproval.
The Fed first hinted that it might reduce its interest rate hikes weeks ago after lower-than-expected inflation reports by the US Labor Department. Furthermore, the minutes from the FOMC meeting in late November confirmed the Fed’s decision to taper rates. Part of the minutes read:
“A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate.”
The previous four Fed rate hikes were for 0.75 percentage points or 75 basis points. Following news of the planned reduction in increase, Bitcoin (BTC) jumped 1% to almost $17K. As of press time, the leading digital currency is exchanging hands at just a hair over $17K.
ADP Report
Powell’s uplifting comments also come following an ADP report on hirings. According to the payroll processing firm on Wednesday, private hiring reduced to its lowest level since January last year. This development showed that companies increased headcount by 127,000 in November, representing a steep decline from October’s reported 239,000 jobs.
The Labor Department appears set to publish a new nonfarm payrolls report on Friday. This report, in addition to next month’s consumer price index (CPI), will be the last significant economic data viewed by the FOMC before its December meeting.
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