The era of zero interest rates ends after two years
Fed to continue tightening until next year The US has finally started raising interest rates. Although there are factors of unrest in the global economy due to the Ukraine war, it is interpreted that it is because it is determined that the priority is to put down the US inflation, which is approaching the worst in 40 years.
The U.S. central bank, the Federal Reserve, announced on the 16th that it would raise the key interest rate by 0.25 percentage points to 0.25-0.50%, from 0-0.25%, after a two-day meeting of the Federal Open Market Committee. The Fed raised interest rates for the first time in three years and three months since December 2018. In March 2020, the Federal Reserve cut interest rates dramatically following the outbreak of the coronavirus pandemic, keeping interest rates at zero for two years.
In particular, the Federal Reserve signaled that it would raise interest rates at each of the remaining six FOMC meetings this year. In the dot chart that showed the future interest rate prospects of FOMC members released on the same day, the members expected the average interest rate level at the end of this year to be 1.9%. If the rate is raised by 0.25 percentage points at each meeting, it means that interest rates will be raised in all six remaining meetings. The average interest rate at the end of 2023 is predicted to be 2.8%. Following this year, he expressed his intention to raise interest rates non-stop next year as well.
U.S. media criticized the announcement as somewhat hawkish, given that the Fed has strongly expressed its intention to continue raising interest rates in the future. Fed Chairman Jerome Powell said: “Once we conclude that raising rates faster is appropriate, we will do so.”
However, the US stock market closed sharply on the day after the Feds willingness to raise interest rates was interpreted as evidence of the robustness of the US economy.