MARKETS
The Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday in an effort to curb high inflation.
Powell said, “Restoring price stability is just something we got to do, and there isn’t an option to fail to do that.” Hw went to say they will not relent in their effort until presented with “compelling evidence” that inflation is coming down. and that another “unusually large” hike may be appropriate in September if price pressures have not sufficiently abated.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the rate-setting Federal Open Market Committee said as it lifted the policy rate to a range of between 2.25% and 2.50%.
The Fed messaged that the economy enjoys underlying strength.
According to Powell “I do not think the U.S. is currently in a recession,” he said, citing an unemployment rate that is still near a half-century low and solid wage growth and job gains. “It doesn’t make sense that the U.S. would be in recession.” However bringing inflation down to the Fed’s goal “is likely to involve a period of below-trend economic growth, and some softening of labor market conditions, but such outcomes are likely necessary to restore price stability and to set the stage for achieving maximum employment and stable prices over the longer run.”
However the Federal Open Market Committee said, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the rate-setting as it lifted the policy rate to a range of between 2.25% and 2.50%.
Stocks on Wall Street added to broad gains in the session
Stocks on Wall Street added to broad gains in the session, with the S&P 500 index (.SPX) closing 2.6% higher, while the dollar (.DXY) weakened.
