FOMC does not follow markets

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Short Note

As expected, the FOMC raised the range for the key interest rate by 0.25% to between 2.25% and 2.50%. The committee was not particularly impressed by the turbulence on the capital markets in recent weeks and the fears of a massive slowdown in the economy. In the statement from the meeting, the economy continued to bear very positive witness. As far as the further interest rate path is concerned, there was now talk of some further gradual interest rate increases and no longer indefinitely of further gradual interest rate increases. The FOMC is thus pointing out that the cycle of interest rate hikes is drawing to an end. The change in wording does not, however, offer the markets any prospect of a pause in interest rate hikes. Chairman Powell stressed that the incoming economic data would be of particular importance for future decisions, as the key rate has reached the lower end of a neutral interest rate range. However, he did not want to confirm a change in the quarterly rhythm of rate hikes.