The Federal Reserve increased the federal funds interest rate by half a percentage point yesterday, the first 50-basis-point hike since 2000.
The Fed said it is “highly attentive to inflation risks,” according to its Federal Open Market Committee statement accompanying the move.
“Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong,” the statement said. “Job gains have been robust in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply-and-demand imbalances related to the pandemic, higher energy prices and broader price pressures.”
In a press conference yesterday afternoon, Fed chairman Jerome Powell specified that the central banking system is ready to institute additional 50-basis-point hikes at each of its next two meetings. The comments sent stocks and crude oil sharply higher, and the dollar and bonds lower. The three major U.S. stock indices soared by more than 2.8 percent after Powell indicated that 75-basis-point moves are not under consideration.
This morning, stock futures retreated slightly. Brent crude was trading between $110 and $111 per barrel, and West Texas Intermediate crude was up around $108 per barrel.