The central bank’s aggressive move to rein in inflation came after the US consumer price index rose 8.6% annually in May, the biggest year-on-year increase since 1981.
Members of the Federal Open Market Committee reiterated the Fed’s commitment to stabilizing inflation and indicated that a strong path to rate hikes is ahead. Officials also lowered the 2022 economic growth outlook from 2.8% to just 1.7%.
The move buoyed riskier assets, but analysts were divided as to the market implications and the scale of a potential recession coming down the pike.
Ronald Temple, co-head of multi-asset and head of U.S. equities at Lazard Asset Management, said: “By recognizing that more hiking now means less later, the Fed has been able to reduce inflation without reducing its employment mandate.” demonstrated his determination to do so.”
“While some viewers argued for an even sharper increase, the Fed understood that the combination of rate hikes and QT takes the US into previously unknown territory with significant risks to growth. Sent the right message.”
Data released on Thursday will include May’s housing starts and building permits, as well as jobless claims figures for last week.
$35 billion of four-week Treasury bills and $30 billion of eight-week bills will be auctioned.