Fed Raises Rate Target By Half A Percentage Point, Most in 22 Years

The Federal Reserve on Wednesday raised its benchmark interest rate target by half a percentage point, the biggest increase since May 2000.

The Federal Open Market Committee, which sets interest rate policy, said its target rate for overnight interbank funding would rise from a range of 0.25 percent to 0.50 percent to a range of 0.75 percent to one percent. In addition, the Fed said it would raise the rate it pays on reserve balances to 0.9 percent.

The Fed also said it would begin reducing its holdings of Treasuries and mortgage bonds on June 1. The Fed said in a plan released along with its monetary policy statement that it will initially shrink its Treasury holdings by $30 billion a month and mortgage bonds by $17.5 billion. After three months at this pace, the run-off’s pace will double to $60 billion of Treasuries and $35 billion of mortgage bonds.

The Fed plans to reduce the size of its balance sheet by not replacing bonds as they mature, a process known as allowing the bonds to “roll off.” The Fed currently has a $9 trillion balance sheet thanks to the quantitative easing programs following the financial crisis of 2008 and the bond buying the Fed launched when the pandemic struck. Because the Fed plans to control the pace of the roll-off, rather than just allowing the balance sheet to shrink at whatever pace bonds expire, it will remain a buyer of bonds for the foreseeable future.

The hike in the target and the rate paid on reserves matched market expectations, as did the pace of balance sheet reduction.

https://www.breitbart.com/economy/2022/05/04/fed-raises-rate-target-by-half-a-percentage-point-most-in-22-years/

In other words, we're screwed.

The Wise And Powerful wrote:

In other words, we're screwed.

YUP

Dow Jones Industrial Average
32,847.13
−1,213.93 (3.56%)today

oliver clotheshoffe wrote:

The Wise And Powerful wrote:

In other words, we're screwed.

YUP

Dow Jones Industrial Average
32,847.13
−1,213.93 (3.56%)today

Glad I took a nap this morning - all the markets are getting hammered.

Oil is up today - https://oilprice.com/

As for the cost of diesel (which truckers pass right on along to us)...

Diesel Hits New Record High on Thursday



Diesel prices hit a new all-time high on Thursday as diesel fuel hit $5.47 per gallon. Last year it was at $3.09 per gallon. Expect the ripple effect to affect the price of consumer goods in the coming days (and weeks and months and years most likely).

https://www.thegatewaypundit.com/2022/05/another-biden-record-diesel-hits-new-record-high-thursday/

Why the stock market is getting thrashed after rallying on Fed hike

Brian Sozzi·Anchor, Editor-at-Large, Thu, May 5, 2022, 10:18 AM

So much for the Federal Reserve being the friend of the stock market.

The Dow Jones Industrial Average plunged 1,000 points on Thursday as traders reassessed what Fed Chair Jerome Powell said at his post-decision press conference yesterday.

A perception of a less hawkish Powell was embraced by the markets on Wednesday afternoon.

The Dow Jones Industrial Average soared 932.27 points and the S&P 500 gained 2.99%, which were the largest gains for the two indices since 2000. Even the beaten-up Nasdaq Composite popped 3.19%.

It now appears that after a few hours of deep thought, traders have formed a more lasting near-term view that the Fed is far from dovish, has let inflation get out of control, and is still poised to dramatically slow down the economy through a series of 50 basis point rate increases.

"Inflation is still going to be a major problem throughout the rest of this year and beyond," Miller Tabak Chief Markets Strategist Matt Maley said.

Selling pressure today was widespread and in some cases severe.

The Nasdaq Composite plunged nearly 5% by early afternoon trading. Small-cap stocks — as measured by the Russell 2000 — dropped more than 4%.

E-commerce companies such as eBay, Etsy, Shopify, and Fastly were hammered amid the one-two punch of broader market pressure and lackluster earnings.

Wall Street pros think the selling could continue in the short term on fears of a sharp, Fed-driven growth slowdown as it catches up on rate increases.

"It is much too soon in economic space for the Fed to allow financial conditions to ease very substantially on a sustained basis again, as this would work against the needed cooling of economic activity required to bring inflation under control," warned EvercoreISI strategist Krishna Guhu. "So if the broad easing on the day across the dollar, equities, rates, and credit continues to rip in the days or even weeks ahead, the Fed will likely have to find a way to rein it in."

The Fed Rate Hike Is 75 Basis Points



Friday’s disastrous Consumer Price Index report has put investors, analysts and especially the Federal Reserve on notice. The latest Fed rate hike is the highest in nearly 30 years. The repercussions of such a move will be both significant and long-lasting.

Friday’s May CPI report largely confirmed what many Americans already knew: Prices are rising — fast. Across the most substantial index categories, energy and food jumped by unprecedented margins.

The energy index increased 3.9% month over month, while soaring 34.6% from last year. This came as an unwelcome surprise to investors, given that energy prices actually fell 2.9% in April. Indeed, inflation actually eased mildly across the board in April, only adding to the shock of the recent figures.

Within the energy index, fuel oil prices experienced a record-high leap, rising 106.7% from last year. This is the largest increase in the history of the index, dated back to 1935. Meanwhile, the electricity index is up 12% from last May, the most significant jump since August 2006.

In the face of overzealous inflation, the U.S. central bank responded in kind.

https://investorplace.com/2022/06/the-next-fed-rate-hike-could-be-75-basis-points-what-that-means-for-investors/