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progree

(11,463 posts)
Wed May 4, 2022, 04:18 PM May 2022

Fed raises interest rates by 0.50%, largest move since 2000

to a target range of 0.75 - 1.00 percent

Some Fed officials are advocating for raising the target closer to 2.5% by the end of the year.

The Fed also officially unveiled a strategy to shrink its asset holdings, after buying trillions of dollars in U.S. Treasuries and agency mortgage-backed securities to contain COVID’s impact on financial markets.

The central bank announced Wednesday that beginning June 1, it will allow up to $47.5 billion a month — $30 billion in U.S. Treasuries and $17.5 billion in mortgage-backed securities — to roll off its balance sheet. That pace will hold from June through August until September, when the Fed ramps that cap up to $95 billion ($60 billion in U.S. Treasuries and $35 billion in mortgage-backed securities).

The Fed hopes the process will allow it to reduce its $9 trillion in holdings, although the central bank has not clarified how small it will allow its balance sheet to shrink. ((at the pace of $95/billion a month, one year of that would reduce holdings by $1.14 Trillion --Progree))

The Fed’s next meeting will take place June 14 and 15.

More: https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-may-2022-142723148.html


Compare conditions to the last time rates were raised by 0.50 percentage points in one gulp

https://finance.yahoo.com/news/the-fed-is-about-to-do-something-it-has-not-done-in-two-decades-morning-brief-100029366.html
In the face of “inflationary imbalances,” the Fed led by Alan Greenspan raised interest rates by 0.50% to a target of 6.5%. ((in May 2000)). That would be the last time the Fed would ever raise interest rates by that much in one move, opting instead to 0.25% increases at a time. ((Update: until today, 5/4/22 -Progree))

... measures of inflation (personal consumption expenditures) were showing prices rising annually by 2.4% in May 2000


ETA There's quite a lot of info in the comments to the LBN story, Fed hikes rates by half a percentage point in fight against inflation
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Fed raises interest rates by 0.50%, largest move since 2000 (Original Post) progree May 2022 OP
"Plant your gardens deep " questionseverything May 2022 #1
I have concerns that this could actually make inflation worse.... TheRealNorth May 2022 #2

questionseverything

(10,208 posts)
1. "Plant your gardens deep "
Wed May 4, 2022, 04:23 PM
May 2022

Between inflation

The necessary rate increases to fight inflation

The supply chain issues

The war in the middle of the world’s breadbasket

Things are going to get lean

TheRealNorth

(9,629 posts)
2. I have concerns that this could actually make inflation worse....
Wed May 4, 2022, 04:54 PM
May 2022

Because I think inflation is mostly being driven by scarcity d/t supply chain, production disruption d/t Covid, war, and labor scarcity; and increased labor costs. Making borrowing more costly could hinder increasing production.

Maybe my economic analysis is off - I am not an economist. But I don't see this inflation being caused by there being too much money in the economy.

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