The Federal Reserve raised the fed funds rate by 25 basis points to a range of 5%-5.25% Wednesday, delivering the eleventh hike in the tightening cycle and bringing the cost of borrowing to the highest since August 2007.
The U.S. banking system is sound and resilient, the Federal Open Market Committee said in a statement. Stricter credit conditions for households and businesses will likely have a negative impact on economic activity, employment and inflation, the FOMC said.
The committee said it will closely monitor incoming data and consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation and economic and financial developments in determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time.
The Fed removed the phrase “in determining the extent of future increases in the target” from its May policy statement.
Market Reaction Ahead Of Powell’s Press Conference
The U.S. stock market slightly fell in the minutes after the statement and before Fed Chair Jerome Powell began his press conference, with the SPDR S&P 500 ETF Trust (NYSE:SPY) falling by 0.1%.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell by 0.06%, while the Invesco QQQ Trust (NASDAQ:QQQ) rose by 0.15% .
Treasury yields held steady, with the 10-year yield firm at 3.38%.
The U.S. dollar weakened, with the U.S. dollar index which is tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), down 0.1%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust (NYSE:FXE), rose 0.1% to 1.1066.
Read also: Former Dallas Fed President Robert Kaplan Explains Why The Central Bank Needs To Pause Rate Hike
Photo courtesy of the Federal Reserve.
