Fed raised interest rate by 0.25%
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The US Federal Reserve increased the base interest rate by 25 basis points. Now the rate range is from 4.5% to 4.75% per annum. This is stated in the communiqué of the Federal Open Market Committee (FOMC) following the results of the February 1 meeting.
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Decision of the Fed
This is the first rate increase in 2023.
The Fed’s statement says that the country is experiencing moderate growth in spending and production, as well as steady job growth. The unemployment rate remains low.
Read also: Jumps in the euro rate and gold fever: what do the meetings of the Fed and the ECB promise
As noted in the document, the Russian Federation’s war in Ukraine led to the growth of “global uncertainty”, including in the economy.
The Committee expects that the current increase in the target range will be appropriate to achieve a monetary policy stance restrictive enough to return inflation to 2% over time.
In addition, the Committee will continue to reduce its holdings of treasury securities and debt obligations of agencies and securities of mortgage agencies, as described in its previously announced plans.
Market expectations
The Fed’s decision to raise the interest rate by 25 bp. coincided with market expectations. The probability of this event as of January 31 was estimated at 99.1%, according to the FedWatch tool, which is calculated by the CME exchange based on rate futures.
In February 2023, the market expects an increase of another 0.25 percentage points. In March, the participants of the auctions with a probability of 85% predict a rate increase also by 25 bps.
Let’s remind
In 2022, the FOMC raised it seven times — by 25 bps. in March, by 50 bp in May and by 75 bp. — in June, July, September and November. In December, the rate was raised by 50 bps.
Starting from March, the rate increased by a total of 425 (+25 bps = 450 bps). Prior to this, the rate had not been raised since 2018. For two years — from March 2020 to March 2022 — the rate was at the level of 0−0.25% per annum.
Author: 
News feed editor Anna Nedogybchenko. She writes on the following topics: Finance, banks, economy, investments
- Fed
- Accounting rate
Source: Ministry of Finance
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