One of the primary tools the FOMC uses to achieve its monetary policy objectives is setting the target range for the federal funds rate, which is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
In recent years, the FOMC has raised the federal funds rate several times, a process known as a “rate hike.” The purpose of these rate hikes is to help control inflation and maintain a healthy economy. The pace of rate hikes has had significant impacts on the economy, as well as on individuals and businesses. Overall, the FOMC’s decisions on interest rates are closely watched by investors, economists, and policymakers, as they can have significant impacts on the broader economy.
The first 2023 FOMC meeting is here. Last week Canada raised their rates by only 25 BPS points, a step down from previous hikes in 2022 to curb inflation. Now, it seems as though the 25 BPS hike in Canada most recently foreshadowed the USA BPS hike.
Source: Federal Reserve YouTube
Throughout 2023, interest rate hikes were indeed helping curb inflation, but at the cost of the economy and a possible recession. The official rate hike decision is here, following expectations of the 25 BPS rate hike in the United States. In what seems to be a step in the right direction, Fed chair Jerome Powell appears to be getting inflation under control, but the main question is if we still have a long way to go.
Fed Chair Jerome Powell’s news conference occurred on February 1, 2023, at 2:30 p.m. 2022 jumbo interest rate hikes have certainly had a lasting impact on the economy, with Jerome Powell stating:
Will hikes officially be over after today? Stay updated with the most recent news by signing up to the email list below or tweet us on Twitter with your thoughts to join the conversation!
Disclaimer: Wealthy VC does not hold a long or short position in any of the stocks mentioned in this article.