Fed raises rates by half a percentage point — the biggest hike in two decades — to fight inflation


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(Worthy News) – The Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point as the most aggressive step yet in its battle against generational highs in inflation.

Along with the move higher in rates, the central bank indicated it will begin reducing asset holdings on its $9 trillion balance sheet. The Fed had been buying bonds to keep interest rates low and money flowing through the economy, but the surge in prices has necessitated a dramatic rethink in monetary policy.

The plan outlined Wednesday will see the balance sheet reduction happen in phases as the Fed will allow a capped level of proceeds from maturing bonds to roll off each month while reinvesting the rest. Starting June 1, the plan will see $30 billion of Treasurys and $17.5 billion on mortgage-backed securities roll off. After three months, the cap for Treasurys will increase to $60 billion and $35 billion for mortgages. [ Source: MSNBC (Read More…) ]

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