The Fed raises interest rates by 75 basis points. It will only ease from 2024 – Monetary policy

The US Federal Reserve (Fed) decided on Wednesday to raise the federal funds rate by 75 basis points for the third consecutive time. With this increase, the key rate goes into a range between 3% and 3.25%, as we had not seen since 2008.

In the statement, the Federal Open Market Committee (FOMC) also reiterated that “it is aware of the risks generated by inflation” and that “it is firmly committed to bringing inflation back to the 2% target.

“The Committee will be prepared to adjust monetary policy if risks arise that could prevent the achievement of objectives,” assures the FOMC. The decision was taken unanimously. The central bank also gave indications of how the next hikes could play out, projections dubbed the “dot plot”.

The monetary authority headed by Jerome Powell projects that the federal funds rate will rise to 4.4% by the end of the year, reaching 4.6% in 2023. According to these projections, the federal funds rate will not should ease only from 2024, when it falls to 3.9%. In 2025, it is expected to drop to 2.9%.

Faced with the Fed’s decision and its dot plot, Wall Street is trading in the red, with the Dow Jones industrial down 0.20% to 30,645.71 points, while the S&P 500 is down 0.78 % at 3,826.04 points. The Nasdaq Tech Composite is trading on the waterline, more prone to negative ground (-0.04%) at 11,420.68 points.

On the debt market, yields on ten-year US bonds eased 4.4 basis points to 3.553%, after returning to 11-year highs on Tuesday. The trend towards relief is followed by “yields” linked to longer maturities, more precisely at 20 years (3.781%) and 30 years (3.530%).

In the lines with shorter maturities, we observe a movement of deterioration. The yield on two-year debt rose 8 basis points to 4.406%, a trend followed by three-year debt (4.011%), five-year debt (3.779%) and seven-year debt ( 3.696%).

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