Breaking: U.S. Federal Reserve Sticks To 25 BPS Hike; Signals At More Interest Rate Increases

The U.S. Federal Reserve has announced an interest rate hike of 25 basis points (bps) which remains analogous to the previous month. This comes after a series of hikes that were formally reported throughout the year ranging from 25 to 75 basis points. Jerome Powell, the Chair of the Federal Reserve, had previously promised a slowdown in rate hikes for March of this year — therefore meeting market expectations.

Rate Hikes Over The Months

The Fed’s latest 25 bps increase remains consistent with the one announced last month, thereby putting an end to the lingering conundrum and debate surrounding the possibility of a 50 bps rate hike. While many also speculated on a “no hike” or “zero hike” following the banking crisis which shook the global market, the Fed seems to be sticking to its plan of raising interest rates for the foreseeable future.

The Federal Open Market Committee (FOMC) raised interest rates by 0.25% in March 2022, stamping the first rise since 2018. In its policy meeting in March, it anticipated six more increases, all of which have subsequently been made. In May, the Federal Reserve announced the first interest rate increase — by 0.5 percentage points — a move first witnessed after the year 2000. This came as a part of the Fed’s policy of economic tightening and has been in continuation until now.

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Market Reaction

Wall Street soared as the Federal Reserve finished its monetary policy meeting on Wednesday by raising its key policy rate by 25 basis points, as was largely anticipated by the financial markets. As investors processed the Fed’s rate hike, the three major U.S. stock indexes, which had been relatively sluggish prior to the announcement, climbed higher in the immediate wake of the announcement.

The Dow Jones Industrial Average closed with a gain of 12 points, which corresponds to an increase of 0.04%, while the S&P 500 recorded a gain of 0.38%. On the other hand, the Nasdaq Composite experienced a jump of 0.75%.

In minutes following the announcement, Bitcoin’s price climbed to $28,740 from $28,450, whereas the altcoin with the second largest market share, Ethereum, increased by 0.50% as it hit $1,807 at the time of writing.

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