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Fed Raises Rates by 75 Basis Points at July FOMC in Fight to Quell Inflation


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Fed Raises Rates by 75 Basis Points at July FOMC in Fight to Quell Inflation

Jul 27, 2022 | DailyFX
Diego Colman, Market Analyst

FOMC KEY POINTS:

  • The Fed raises the federal funds rate by 75 basis points to 2.25%-2.50%, in line with market expectations
  • The FOMC statement retains the guidance that ongoing increases in the target range will be appropriate, a sign that more hikes are on the horizon
  • With the July monetary policy meeting in the rearview mirror, all eyes will be on the U.S. second quarter GDP report on Thursday

FOMC STATEMENT

The FOMC communique took a less optimistic view of the economy than last month, warning that indicators of production and spending have softened, although concerns about the slowdown were offset by positive comments that the labor market remains robust.

On consumer prices, the Fed noted that CPI continues to be high, reflecting higher energy costs and supply and demand imbalances, noting that the bank remains attentive to inflation risks.

On the monetary policy front, the FOMC retained the same forward-guidance as previous statements, indicating that ongoing increases in the target range will be appropriate. This suggests that policymakers will raise borrowing costs above the neutral level, which is believed to be around 2.5%, and into restrictive territory in the coming months.

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