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The Federal Reserve raises interest rates by 75 basis points.  It only eases 2024 - monetary policy

The Federal Reserve raises interest rates by 75 basis points. It only eases 2024 – monetary policy

The US Federal Reserve decided on Wednesday to raise the federal funds rate by 75 basis points, for the third time in a row. With this rally, the key interest rate is moving between 3% and 3.25%, like we haven’t seen since 2008.

In the statement, the FOMC also stressed that it is “aware of the risks posed by inflation” and is “strongly committed to bringing inflation back to the 2% target.”

“The Committee will be prepared to adjust monetary policy if risks arise that may prevent the achievement of the objectives,” assures the FOMC. The decision was passed unanimously. The central bank has also given signals about how the next increases could be, forecasts dubbed “the point chart”.

The monetary authority led by Jerome Powell forecasts that the fed funds rate will rise to 4.4% by the end of the year, reaching 4.6% in 2023. According to these forecasts, the fed funds rate should only decline from 2024 onwards. It drops to 3.9%. In 2025, it should drop to 2.9%.

Faced with the Fed’s decision and its dot chart, Wall Street is trading in the red, with the Dow Jones Industrial Average down 0.20% to 30,645.71 points, while the S&P 500 shed 0.78% to 3,826.04 points. The Nasdaq Technology Composite Index is trading on the waterline, leaning more towards negative ground (-0.04%) to 11,420.68 points.

In the debt market, interest rates on US 10-year bonds fell 4.4 basis points to 3.553%, after Tuesday renewed their 11-year highs. The exemption trend is followed by returns related to longer maturities, more specifically at 20 years (3.781%) and 30 years (3.530%).

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In lines with shorter maturities, there is a movement that is getting worse. The two-year debt yield adds up to 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%).