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Economy

17 Mar 2022

Fed Raises Interest Rate by 25 bps; Signals Six Additional Rate Hikes to Come

The Index Today

The U.S. Federal Reserve implemented the first of the several rate hikes for this year on Wednesday following the conclusion of its monetary policy meeting, as the Ukraine-Russia crisis and the latest outbreak of COVID-19 in China loom.

The Fed has opted for its most aggressive stance in decades to counter mounting pandemic-induced inflation, having hiked its benchmark rate by a quarter-point between a 0.25% - 0.5% range.

According to Reuters, Fed Chair Jerome Powell contended that the economy is doing well enough to sustain additional rate hikes without impeding its ability to retain its present favorable hiring and wage progress. Speaking at a news conference, Powell said, “[W]e feel the economy is very strong and well-positioned to withstand tighter monetary policy."

However, the Fed also decreased their GDP growth projection for the economy from 4% in December to 2.8% in 2022, due to various other risk factors, mainly the war between Russia and Ukraine.

Powell said, “That is just an early assessment of the effects of spillovers from the war in Eastern Europe, which will hit our economy through a number of channels.” He added, “You are looking at higher oil prices, higher commodity prices. That will weigh on GDP to some extent.”

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