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Fed raises interest rates by 75 basis points. It only eases from 2024 – Monetary Policy

The US Federal Reserve (Fed) decided this Wednesday to raise the federal funds rate by 75 basis points, for the third consecutive time. With this rise, the key interest rate moves to a range between 3% and 3.25%, as has not been seen since 2008.

In the statement, the Federal Open Market Committee (FOMC) also reiterated that “it is aware of the risks generated by inflation” and that “it is strongly committed to bringing inflation back to the 2% target.

“The Committee will be willing to adjust monetary policy if risks arise that could prevent the achievement of the objectives”, assures the FOMC. The decision was passed unanimously. The central bank also gave signs on how the next hikes could be, projections dubbed the “dot plot”.

The monetary authority led by Jerome Powell predicts that the federal funds rate will rise to 4.4% by the end of the year, reaching 4.6% in 2023. According to these projections, the federal funds rate should only ease from 2024 onwards. , when it drops to 3.9%. In 2025, it should drop to 2.9%.

Faced with the Fed’s decision and its dot plot, Wall Street is trading in the red, with the industrial Dow Jones down 0.20% to 30,645.71 points, while the S&P 500 is down 0.78% to 3,826.04 points. . The technological Nasdaq Composite trades on the waterline, more inclined to negative ground (-0.04%) to 11,420.68 points.

In the debt market, interest rates on US ten-year bonds eased 4.4 basis points to 3.553%, after this Tuesday renewed 11-year highs. The relief trend is followed by the “yields” related to longer maturities, more specifically at 20 years (3.781%) and 30 years (3.530%).

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In the lines with shorter maturities, there is a worsening movement. The two-year debt yield adds up to 8 basis points to 4.406%, a trend followed by three-year debt (4.011%), five-year debt (3.779%) and seven-year debt (3.696%).