(Finance) – The Federal Open Market Committee (FOMC) of the US central bank has decided to increase the target range for the federal funds rate at 0.75-1%, equal to a 50 basis point increase. Furthermore, the Monetary Policy Committee provides that “continued increases in the target range will be appropriate“This is the largest increase in interest rates since 2000. FED officials have also decided to start reducing their balance sheets, namely Treasuries, agency debt and agency mortgage-backed securities. , starting June 1st.
The FED will begin decreasing the Treasury and mortgage-backed securities it owns at a initial combined monthly rate of 47.5 billion dollars, increasing after three months to 95 billion. dollars. In particular, for Treasuries the limit will initially be set at $ 30 billion per month and after three months it will increase to $ 60 billion per month. For agency debt and mortgage-backed securities, the cap will initially be set at $ 17.5 billion per month and will increase to $ 35 billion per month after three months.
In its analysis of the US economy, the FOMC points out that although overall economic activity slowed in the first quarter, household spending and corporate fixed investment “remained strong”. Job earnings have been “robust” in recent months and the unemployment rate has “dropped significantly”. Inflation “remains high, reflecting supply and demand imbalances linked to the pandemic, rising energy prices and wider price pressures”.
In the statement released at the end of the monetary policy meeting, it is emphasized that the invasion of Ukraine by the Russia it is causing enormous human and economic hardship. “The implications for the US economy are very uncertain – reads – The invasion and related events are creating further upward pressure on inflation and risk weighing on economic activity. Furthermore, it is likely that the restrictions related to Covid in China they will aggravate interruptions in the supply chain. “Ultimately, the Committee says it is” very attentive to the risks of inflation “.