Fed Continues Aggressive Move to Rein In Inflation | September 21, 2022
As widely anticipated, the Federal Reserve Open Market Committee (FOMC) decided to raise the target range for the federal funds rate 0.75 percentage points, or 75 basis points, to 3 to 3 ¼ percent as part of the Committee’s commitment to achieve maximum employment and inflation at the rate of 2% over the longer run. A continuation of a reduction of the Federal Reserve’s holding of Treasury securities and agency debt as well as agency mortgage-backed securities is also planned. Looking ahead, “the Fed also expects its so-called terminal rate to reach 4.6% to fight persistently high U.S. inflation” — the peak spot where the federal funds rate will come to rest before the central bank begins trimming it back, further indicating that it plans to stay aggressive, hiking rates to 4.4% by next year. News of the Federal funds rate hike sparked a rise in U.S. Treasury Yields. The yield on the benchmark 10-year U.S. Treasury note was 3.609% in recent trading, up from 3.577% just prior to the Fed’s decision announcement, while the 2-year note, which is more sensitive to the near-term interest-rate outlook rose more sharply from 3.989% to 4.079% during the same time frame.