The Federal Open Markets Committee (FOMC) raised its target interest rate for the federal funds rate by 75 basis points, or 0.75%, on Wednesday marking the highest back-to-back rate increase since the 1980’s.
The Chairman of the FOMC and Federal Reserve, Jerome Powell, addressed the rate increase during the customary follow-up press conference.
Powell began by noting that indicators for spending and production have both slowed, but attested that labor market conditions were still strong.
Additionally, Powell discussed a myriad of subjects including continued supply chain constraints, fears of recession, continued quantitative tightening, the Ukrainian war, and gave insight to future possible FOMC action as it relates to the rising pressures of inflation.
“Another unusually large increase could be appropriate at our next meeting,” Powell warned.
During last month’s FOMC meeting, Powell explained that the committee’s intention is not to induce a recession. However, hints at this meeting towards continued obstacles facing the borrowers of the economy via rising rates leave little room for positive economic growth. In fact, the chairman explained that a recession is more than a probability — it’s likely to happen due to continued rate increases.
Powell made it clear that further increases are likely to come, and the FOMC believes the economy needs to slow down for the U.S. to reclaim any hope of price stability.
“This process is likely to involve a period of below trend economic growth and a softening of labor market conditions,” he explained. “We think it’s necessary to have growth slow down.”
Ahead of the press conference and news of the rate increase, bitcoin’s price rose above $22,000, briefly touching $23,000. The peer-to-peer digital cash was exchanging hands at $22,800 at the time of reporting.