Powell said that the Fed doesn't see evidence of a wage-price spiral at the moment, but there is a mismatch of supply and demand in the labor market.
Wage increases are running at levels that are well above what would be consistent with 2% inflation.
The idea of a wage-price spiral is a factor in how inflation becomes more persistent, with workers demanding higher wages to pay for more expensive items, thus driving prices up even more. The Fed Chair said that some areas of the economy that saw hot wage growth last year appeared to be stabilizing.
Jesse Pound.
Chairman Powell said that the Fed could start reducing the size of its holdings as soon as May.
The Federal Open Market Committee indicated in its post-meeting statement that it expects to begin reducing its holdings of Treasury securities and agency debt at a coming meeting.
Powell gave some information during his press conference. He said that the process could be implemented at our next meeting in May, after the committee made exceptional progress in getting the process started.
He said that the framework will look familiar to people who have seen it before.
The Fed allowed a set amount of proceeds from maturing bonds to roll off each month while the rest was reinvested. The Fed used $50 billion a month in the prior case, but Powell's comments indicate this time will be more aggressive.
The Fed's balance sheet has ballooned due to years of bond buying. Markets think that will be cut by several trillion dollars.
When asked if higher interest rates could lead to higher unemployment rates, Chair Powell emphasized the Fed's focus on achieving price stability by addressing inflation.
Powell said that without price stability, you can't have a sustained period of maximum employment. We believe we can do that. We need to restore price stability.
The shares of major technology companies jumped as Fed Chairman Powell answered questions from reporters following the central bank's first rate hike in three years.
Meta Platforms, the parent of Facebook, gained 4%. Both Microsoft and Apple advanced.
Fred Imbert.
The major U.S. stock averages fluctuated as traders listened to the Fed Chairman's news conference.
After the Fed statement was released, the Dow fell more than 100 points, but was up 90 points as of 3 p.m. Time. The S&P 500 was up by 0.9% and the Nasdaq was up by 2.1%.
Fred Imbert.
The Fed expects inflation to return to 2%, but it will take longer than expected, Chairman Powell said during a press conference after the rate hike decision.
He said that they expect inflation to return to 2%, while the labor market remains strong.
Powell said that the median inflation projection is 4.3% for the year. The trajectory through 2024 is higher than initial projections.
The person isSamantha Subin.
When asked what would prompt the Fed to adjust the pace of its rate hikes, Chair Powell said the central bank could speed up its plans if more aggressive monetary tightening is needed.
Powell said that every meeting is a live meeting.
I can't be specific about it. He said that it is a possibility as we go through the year.
Hannah Miao.
The US economy faces a number of risks, including a massive surge in inflation, but Fed Chairman Powell thinks the chances of a recession are low.
The probability of a recession within the next year is not particularly elevated.
He said that there are signs that the economy is strong.
At a future policy meeting, Powell said the central bank is going to start reducing its holdings on the balance sheet.
Powell said at the post-March meeting press conference that the beginning of balance sheet reduction would be announced at an upcoming meeting.
In making decisions about interest rates and the balance sheet, we will be aware of the broader contexts in markets and the economy, and we will use our tools to support financial and macroeconomic stability.
Hannah Miao.
Powell said that inflation is likely to take longer to return to the Fed's price stability goal.
Powell's opening remarks are below.
The risk that the central bank could tighten monetary policy too fast and hurt economic growth still exists despite the Fed's projection of six more hikes this year, according to E-Trade's managing director of investment.
Lowerngart said that the risk of trying to tame inflation by raising rates crosses the line from cooling a too-hot economy to freezing it, which could pressure corporate earnings and stock prices.
The Fed raising rates means a vote of confidence that the economy is strong enough to weather tighter policies, he said.
Li Yun.
The Fed expects to raise rates at each of its remaining meetings. Giles Coghlan said future rate increases will come with caveats.
We may see a more dovish approach to tightening, rather than the aggressive approach we have been primed for over the past year. Today, we could see a response to the announcement which would favour upside in stocks, gains for gold and silver, as well as a drop in US 10 year yields.
Fred Imbert, Tanaya Macheel.
According to David Kelly, chief global strategist at JP Morgan Asset Management, the Fed is overdoing it by projecting six more interest rate hikes this year.
I'm not surprised the stock market is down. He said on Power Lunch that he thought this was a very aggressive move and that the 30-stock average briefly went negative as investors processed the Fed statement.
I just want the Fed to be flexible. We need to get rates back to positive real levels in the long run.
Kelly thinks the Fed should focus on reducing its balance sheet instead of raising its rates.
Kevin Stankiewicz.
According to the new economic projections released by the Federal Open Markets Committee on Wednesday, the Federal Reserve sees higher inflation and lower economic growth in the years to come.
4.3% PCE inflation is projected by the Fed, up from 2.5% in December. The central bank expects that to go down to 2.5% in 2023 and then go back up to 2.5% in 2024.
The Fed now sees 2.8% GDP growth in 2022, down from 4% in previous projections.
Jesse Pound.
The Fed's first interest rate hike in more than three years and the fact that more hikes are to come caused the Dow to turn negative on the day.
The 30-stock average traded just below the flatline after jumping as much as 531 points earlier in the day. The S&P 500 traded off its highs.
The 10-year yield hit its highest in a year.
Fred Imbert,Samantha Subin.
Click here to see what changed from the Fed statement.
Fred Imbert.
The Federal Reserve expects to raise rates six more times this year and predicts a funds rate of 2% by the end of the year.
The Fed's policymaking committee signaled it sees three more rate increases in 2023 and raised its inflation expectations for the next three years.
Fred Imbert.
The Fed raised rates by 25 points. This is the first rate hike in a year.
The Fed's nearly $9 trillion balance sheet was addressed in the post-meeting statement.
The full story on the Fed's historic move can be found here.
Fred Imbert, Jeff Cox.
The pace at which the central bank tightens monetary policy could be slowed by a set of unique challenges.
Russia's invasion of Ukraine has worsened inflation and turbulence in financial markets. The S&P 500 is down more than 3% in the past month and is down more than 10% from a record high.
The Fed is expected to raise rates as many as six more times. There is a dark cloud of uncertainty over this meeting, according to Morgan Stanley Investment Management.
The economy is coming into full employment and inflation is too high, so they have to raise rates. The degree of uncertainty is extraordinary. They told us what they were going to do. They did that to get rid of the uncertainty.
You can read more here.
Imbert, Domm
Minutes away, the Federal Reserve will announce its latest monetary policy. There is a look at where the markets are.
Fred Imbert.
The Federal Reserve will soon announce its latest decision on monetary policy, which comes as the Ukraine-Russia war rages on and U.S. inflation climbs to levels not seen in decades.
The central bank is expected to raise rates by 25 basis points. The Fed is expected to raise its full-year inflation outlook to 4% from 2.5%. The Fed's plan to get rid of its massive balance sheet will be looked at by investors.
It is a given. State Street Global Advisors chief economist Simona Mocuta said what matters most is what comes after. The uncertainty is very high. The trade-offs have gotten worse.
You can read more here.
Fred Imbert, Jeff Cox.
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