Federal Reserve Hikes Rate by 25bps to Keep Inflation at Bay, Aims for 2% Inflation Rate by 2025

Federal Reserve Hikes Rate by 25bps to Keep Inflation at Bay, Aims for 2% Inflation Rate by 2025

Following the fallout over the past two weeks in the U.S. banking industry, the Federal Reserve raised the federal funds rate by 25 basis points (bps) on Wednesday, citing the need for the inflation rate to return to 2% over the long run. Fed Raises Rate Despite Calamity in the U.S. Banking Sector

It’s been a rough two weeks for the U.S. economy after the fall of Silvergate Bank, Silicon Valley Bank, and Signature Bank. After these bank failures took place, the Federal Reserve announced the creation of the Bank Term Funding Program (BTFP) and announced that uninsured depositors of Signature Bank and Silicon Valley would be made whole. After the turmoil in the banking industry, some experts suspected the Fed would not raise the benchmark rate this month.

On Wednesday at 2 p.m. Eastern Standard Time, the Federal Open Market Committee (FOMC) revealed that it would raise the rate by 25bps. “The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the FOMC said. “In support of these goals, the committee decided to raise the target range for the federal funds rate to 4-3/4 to 5 percent. The committee will closely monitor incoming information and assess the implications for monetary policy.”

In addition, the Fed published the central bank’s “Summary of Economic Projections,” which suggests the inflation rate can reach 2.1% by 2025 and 2% over the longer run. By 2025, the FOMC projections see the federal funds rate reduced down to 3.1%. Following the FOMC’s statement and projections report, equity markets jumped higher on the news, with three out of four of the U.S. benchmark indices in the green. Fed’s “Summary of Economic Projections.”

Crypto assets dropped after the small increase from the Fed, with bitcoin (BTC) nearing the $29K range at $28,700 at 2:15 p.m. Eastern Standard Time on Wednesday. But by 2:45 p.m., BTC had quickly dropped down to the $27,876 per unit range. At present, BTC’s USD value is hovering just above the $28K zone.

While cryptos had a mixed reaction to the Fed news, precious metals held strong. Both gold and silver jumped on the Fed hike, rising 1.6% to 2.5% higher against the greenback. Overall, the FOMC statement noted that recent indicators have shown “modest growth in spending and production.”

Further, the Fed says that while “job gains have picked up in recent months and are running at a robust pace [and] the unemployment rate has remained low, inflation remains elevated.”

After the FOMC press statement, Fed chair Jerome Powell insisted the U.S. banking system “is sound and resilient with strong capital and liquidity.” Powell added, “we think our monetary policy tool works, and we think … our rate hikes were well telegraphed to the markets, and many banks have managed to handle them.” Tags in this story Asset Purchases, Bitcoin, Bond yields, Central Bank, economic analysis, economic data, economic growth, economic indicators, economic outlook, economic recovery, Economy, Fed, Fed Hike, Federal Reserve, Financial Markets, FOMC, FOMC statement, gold, Greenback, inflation, inflation rate, interest rates, jerome powell, market volatility, Monetary Policy, monetary stimulus, production, quantitative easing, rate hikes, silver, spending, Stock Market, unemployment rate

What do you think the Fed’s decision to raise interest rates means for the U.S. economy? Share your thoughts about this subject in the comments section below. Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today. Onecoin Head of Legal and Compliance Charged for Role in Crypto Pyramid NEWS | 10 hours ago Biden Administration"s Economic Report Deems Crypto Assets ‘Mostly Speculative Investment Vehicles’ NEWS | 19 hours ago

Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleUS Central Bank’s Fednow Payment Service to Launch in July, Economist Calls Timing ‘Suspicious’ Next articleValue Locked in Defi Rises Above $50 Billion Mark, Ethereum Dominates TVL by Blockchain Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItRipple CEO: SEC Lawsuit Over XRP "Has Gone Exceedingly Well"

The CEO of Ripple Labs says that the lawsuit brought by the U.S. Securities and Exchange Commission (SEC) against him and his company over XRP "has gone exceedingly well." He stressed: "This case is important, not just for Ripple, it’s ... read more.Central Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year Goldman Predicts US Recession Odds at 35% in 2 Years, John Mauldin Wouldn"t Be Surprised if Stocks Fell 40% Fed"s Bullard Wants to Raise Bank Rate to 3.5% by Year"s End, Hints at 75 Basis Point Rate Hike Terra"s Algorithmic Dollar-Pegged Crypto UST Is Now the Third-Largest Stablecoin