Federal Reserve raises interest rates to highest level since 2008, signals a pivot in tightening

Interest rates now stand at their highest levels since 2008 after the Federal Reserve pulled the trigger on another 75-basis-point rate hike.

The Federal Open Market Committee (FOMC) brought the benchmark fed funds rate to 3.7 percent and 4.00 percent.

Investors expect the central bank will agree on another 75-basis-point increase in December. They also anticipate the effective terminal rate to climb to 4.97 percent in May 2023.

But financial markets are rallying on the Fed potentially slowing down the pace of its tightening cycle. Essentially, it is pivoting, despite assurances that it will keep raising rates until it has brought down inflation.

“[The Committee] will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial development,” the FOMC said in a statement. “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

Here is the feed to Fed Chair Jerome Powell’s post-FOMC press conference:

https://www.youtube.com/watch?v=-yiC8wZvzgQ