The Federal Reserve officially announced that it would raise interest rates on Wednesday, February 1, by 25 basis points, bringing the total to 4.75 percent. This is the first time in over 15 years that rates have been this high. The interest rate increase was in line with what was anticipated, and Federal Reserve Chairman Jerome Powell indicated that further rate rises are likely to occur this year.
A Fresh Rate Increase on the Cards
Throughout a more extended period, the Federal Reserve intends to reach full employment and drive inflation down to below its target rate of 2%. Jerome Powell, Chairman of the Federal Reserve, stated the following during his news conference on Wednesday:
"The labor economy tends to be out of balance" and "much more evidence" will be required to "judge that inflation is on a persistent downward trend," respectively, according to the statement made by the Federal Reserve. In addition, Powell stated that a "deflationary process has begun" and that "it's at an early stage."
This most recent rate increase of 25 basis points already represents a deceleration from the rapid pace of the prior rate increases. The Federal Reserve maintained its rate rise of fifty and seventy-five basis points during the remaining twelve months of 2022.
Powell continued by saying that "moving toward a slow rate will better enable the panel to assess the economy's progress toward our goals." We are confident that future increases in the fed funds rate range will align with our expectations.
Will the Fed Make a Turn?
Despite Powell's hints that there would be further rate rises, market professionals think the Federal Reserve might shift away from its current approach of raising interest rates.
Others believe that a recession may be on the horizon if the Fed keeps acting as it has. Bill Zox, the financial planner of Brandywine Global, stated the following when CNBC interviewed him:
I am still determining whether or not the Fed is even attempting to achieve a smooth landing. Even while they would never admit it, it's possible that they would like the healing features of a recession and a healthy bear market more.
The stock market benchmarks have received some support due to certain firms' announcements of solid profits during the fourth quarter of corporate results.
On Wednesday, after reporting better-than-expected profits, Advance Micro Devices saw its share price surge by more than 12 percent. Yesterday, the S&P 500 index finished the day with a gain of 1%, coming in at 4,119.21.
Along the same lines, the absolute value of the crypto currency market has increased by more than 4% and is now trading at over $ 1.08 trillion. The price of a single Bitcoin has risen by more than 3% and is presently trading at $23,8201. Its market worth is currently $458 billion.
The crypto currency alternative market is also exhibiting significant gains, with Ethereum (ETH), Cardano (ADA), and Polygon (MATIC) all showing increases of between 5 and 12%.