US Fed Raises Interest Rate by 0.25%P for the First Time in 3 Years and 3 Months... Indicates 6 More Increases Possible

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The U.S. central bank, the Federal Reserve (Fed), ended the era of zero interest rates by raising rates for the first time in 3 years and 3 months.

On the 16th (local time), the Fed announced after the Federal Open Market Committee (FOMC) regular meeting that it would raise the federal funds rate by 0.25 percentage points from the previous 0.00-0.25% to 0.25-0.50%. This is the first rate hike by the Fed since December 2018, 3 years and 3 months ago.

Additionally, through the dot plot showing future rate projections, the Fed forecasted the rate to reach 1.9% by the end of this year. This implies six additional 0.25 percentage point hikes in the remaining FOMC meetings. It also anticipated three rate hikes next year.

The FOMC stated, "It is expected to be appropriate to continue raising the target range." Regarding Russia's invasion of Ukraine, it noted, "The impact on the U.S. economy is highly uncertain," but added, "It may put additional upward pressure on inflation in the short term and weigh on economic activity."

This year, the U.S. gross domestic product (GDP) growth forecast was revised downward from 4.0% to 2.8%. The inflation rate forecast was raised to 4.3%. The unemployment rate forecast remained unchanged at 3.5%.

The market is closely watching the upcoming press conference of Fed Chair Jerome Powell for details on the pace and scale of future tightening and specific plans for balance sheet reduction.

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