This week all eyes were focused on the Fed in anticipation of their rate decision.
Change was expected, but would it be an increase of 75 basis points or 100 basis points, given the prior week’s report of the Consumer Price Index rising 8.3% year‐over‐year? Recall the Fed has stated its goal to reduce the annual rate of inflation to 2%.
As expected, the Fed implemented an increase of 75 basis point, bringing their target range to 3.00% – 3.25%. In his comments yesterday, Chair Powell also affirmed the Fed’s intent to “significantly [reduce] the size of [the Fed’s] balance sheet.”
Outside the U.S., monetary authorities implemented similar actions to battle inflation. The Bank of England raised their key rate by 50 basis points last Thursday.
Norway, the first developed market economy to begin rate hikes, also raised their key rate by 50 basis points. Sweden raised their key rate by 175 basis points, the largest increase in rates by a monetary authority and their biggest increase since 1993.
The Swiss National Bank migrated from a negative rate posture by raising their key rate by 75 basis points from ‐0.25% to 0.50% thus putting an end to negative rates within Europe. The only monetary authority to buck this trend was the Bank of Japan, which maintained its current short‐term policy rate at ‐0.1%.