Here’s a full recap of the Fed’s 0.75 percentage point rate hike and Powell’s comments
The Federal Reserve announced a 75 basis point rate hike on Wednesday. Fed Chair Jerome Powell left the door open for another rate increase of that magnitude, and stocks rallied as investors looked favorably on the central bank's tougher stance against inflation.
'Soft landing' still on the table, Powell says
Federal Reserve Chair Jerome Powell said it is still possible for the central bank to achieve a "soft landing," in which the Fed brings down inflation without causing a recession.
"I think what's in the SEP would certainly meet that test," Powell said, referencing the Fed projections that show inflation nearing 2% with inflation just over 4% in 2024.
The Fed chair did say that the central bank cannot control all the factors driving inflation, such as oil prices that have been pushed higher by Russia's invasion of Ukraine.
"I think events of the last few months have raised the degree of difficulty, created great challenges," Powell said. "And there's a much bigger chance now that it will depend on factors that we don't control."
— Jesse Pound
Market likes Powell's 'resolve' against inflation
On why stocks are reacting positively to Federal Reserve Chair Jerome Powell's comments about a possible second 0.75 percentage point hike next month:
"After Friday's CPI report, the Fed needed to prove once again it was serious about fighting inflation," said Barry Gilbert, asset allocation strategist for LPL Financial. "The more aggressive stance can still be consistent with a softish landing for the economy, but the path is getting narrower. We still think the Fed may be able to back off from its new forecast of a 3.4% benchmark rate at the end of the year, but for now the priority is showing resolve."
Powell says Fed can achieve 'successful outcome' even if unemployment rises
The Federal Reserve's updated economic projections show an expected rise in unemployment in the years ahead as the central bank hikes rates to fight inflation. Fed Chair Jerome Powell said that may be a worthwhile trade off for a healthy economy.
"If you were to get inflation on its way down to 2%, and unemployment up to 4.1%, that's still a historically low level. … 3.6% is historically low in the last century," Powell said. "So a 4.1% unemployment rate, with inflation well on its way to 2%, I think that would be a successful outcome."
Powell added that lower inflation is necessary to have a healthy labor market in terms of real wage gains and strength among all demographic groups.
— Jesse Pound
Aggressive Fed will 'appease the market' for now, Allianz's Ripley says
Allianz Investment Management's Charlie Ripley said the Fed's more aggressive monetary policy stance should bolster the market, at least in the near term.
"Today's announcement confirms the Fed's commitment to fight the inflation battle more aggressively despite the potential aftermath from raising rates at such a rapid pace," the firm's senior investment strategist said. "Overall, Fed policy rates have been out of sync with the inflation story for some time and the aggressive hikes from the Fed should appease markets for the time being."
Stocks and bonds rallied as Chairman Jerome Powell answered questions from the media. The Dow Jones Industrial Average and S&P 500 were both up at least 1%, while the Nasdaq Composite popped more than 2%.
We'd like to do more front-end loading to get to normal levels, Powell says
The Federal Reserve will continue to hike rates to bring them to more "normal" levels, said Chair Jerome Powell. The central bank delivered a 75 basis point rate hike at the conclusion of Wednesday's policy meeting because it believed "strong action" was necessary.
"The federal funds rate, even after this move, is at 1.6%," Powell said. "The committee is moving rates up expeditiously to more normal levels, and we came to the view that we'd like to do a little more front-end loading on that."
— Sarah Min
Stocks climbed higher after Powell leaves the door open for another 75 basis point rate hike
The major indexes jumped higher after Federal Reserve Chair Jerome Powell indicated that another 0.75 percentage point rate hike could be possible. Investors cheered central bank officials taking a tougher stance on inflation.
At 3:10 p.m. ET, the S&P 500 was up nearly 1.6%, while the tech-heavy Nasdaq Composite gained 2.6%. The 30-stock Dow jumped more than 350 points.
Powell: 'We're not trying to induce a recession now. Let's be clear about that'
Federal Reserve Chair Jerome Powell made it clear during Wednesday's press conference that the central bank's actions are not intended to tip the economy into a recession.
"We're not trying to induce a recession now. Let's be clear about that," he said.
"We're trying to achieve 2% inflation with a strong labor market — that's what we're trying to do," he added.
— Pippa Stevens
Powell says Fed is 'absolutely determined' to hold down inflation expectations
Jerome Powell said Wednesday's 75-basis-point hike was due in part to the Federal Reserve being worried about inflation expectations increasing.
Most measures still show that Americans expect inflation to return to normal in the coming years, but there were some signs of stress, Powell said.
"If we even see a couple of indicators that bring that into question, we take that very seriously. We do not take this for granted," he said.
The Fed chair said the preliminary University of Michigan consumer sentiment report for June, which includes inflation expectations, was "quite eye-catching." Powell also pointed to the Fed's common inflation expectations index as a reading showing a possible increase in inflation expectations.
"We're absolutely determined to keep them anchored at 2%," Powell added.
— Jesse Pound
Powell looking for demand to moderate, balanced labor market
A 50 basis point or 75 basis point increase seems 'most likely' at the next Fed meeting, Powell says
Fed Chair Jerome Powell expects a 50 or 75 basis point rate hike will be "most likely" at the next central bank policy meeting. He said the policymakers will make rate increases as appropriate based on incoming economic data.
"Clearly today's 75 basis point increase is an unusually large one and I do not expect moves of this size to be common," Powell said. "From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting."
"We will however make our decisions meeting by meeting and we'll continue to communicate our thinking as clearly as we can."
— Sarah Min
Aggressive Fed welcomed by some on Wall Street
Some on Wall Street greeted the Federal Reserve's larger rate hike as a positive sign of the central bank's focus on inflation.
"The Fed nailed it. Recognizing that hiking more now means less later, the Fed demonstrated its resolve to tame inflation without undermining its employment mandate," said Ronald Temple, head of U.S. equity at Lazard Asset management. "While some spectators argued for an even steeper hike, the Fed understood that the combination of rate hikes and QT already takes the US into uncharted territory with significant risks to growth. The hike today sent exactly the right message to markets."
Chair Jerome Powell indicated in May that the Fed was unlikely to do a hike of 75 basis points in June, but inflation has continued to rage since that meeting.
— Jesse Pound
Fed members predict benchmark rate will end 2022 above 3%
The Fed expects the fed funds rate to increase by another roughly 1.75 percentage points over the next four policy meetings to end the year above 3%.
To be exact, the midpoint of the target range for the fed funds rate would go to 3.4%, according to the so-called dot plot forecast released by the Fed.
Just five of the 18 Federal Open Market Committee members see the rate ending at a higher level than the midpoint 3.4% rate, while eight members see it about that level. The remaining five members expect the the fed funds rate the end the year at roughly 3.2%.
The big rate hike is priced in, but expect volatility as tightening continues, says strategist
The Fed just pulled off its most aggressive interest rate hike since 1994, and yet the market has so far had little reaction to the move.
"Even two weeks ago we may have thought that a .75% increase was off the table, at least in the short term. But with inflation not letting up, it's become pretty clear that the Fed needs to take a more aggressive approach," said Mike Loewengart, managing director of investment strategy at E-Trade. "And as we entered bear territory this week, the market may have already priced in a higher-than-expected jump."
Still, Loewengart expects wild price swings going forward as the Fed continues to fight inflation.
"That's not to say the larger hike may spook some investors. Keep in mind that as we go through a changing monetary policy landscape, we'll likely continue to see volatility as the market digests the new norm," he added.
— Yun Li
Inflation is a focal point in the Fed's policy statement
The FOMC's policy statement today runs 368 words, and only mentions "Ukraine," "supply chain" and "Covid" one time each. "Inflation" was cited seven times.
The Fed says it's 'strongly committed' to tamping down inflation
The Fed stressed its dedication to bringing down soaring inflation in its post-meeting statement.
"The Committee is strongly committed to returning inflation to its 2 percent objective," the Federal Open Market Committee said in the statement.
The rate-setting committee removed a long-used phrase indicating that the FOMC "expects inflation to return to its 2 percent objective and the labor market to remain strong."
— Yun Li
What's changed in the new Fed statement
Click here for a comparison of Wednesday's Federal Open Market Committee statement with the one issued after the central bank's previous policymaking meeting on May 4.
— Yun Li, Jesse Pound
Fed raises rates by 0.75 percentage point
The Federal Reserve announced that it raised interest rates by 75 basis points or 0.75 percentage point. This marks the greatest rate increase in 28 years.
The Federal Reserve announced that it raised interest rates by 75 basis points or 0.75 percentage point. This marks the greatest rate increase in 28 years, and it brings the benchmark funds rate to a range of 1.5% to 1.75%.
Individual members of the Fed expect the benchmark rate will end 2022 at 3.4%, 1.5 percentage points higher than the March estimate.
Fed officials also cut their outlook for 2022's economic growth. They now predict a 1.7% gain in GDP, down from 2.8% in March.
-Darla Mercado, Jeff Cox
S&P 500 can gain 23.8 basis points after Fed meeting
The S&P 500 historically gains an average 23.8 basis points following the conclusion of a Federal Reserve policy meeting when the broad-market index is already up by 100 basis points by noon, according to data from Bespoke. One basis point is equal to 0.01%.
This is compared to an average 5.1 basis point gain for all Fed meeting days.
— Sarah Min
Here's where the markets stand ahead of the Fed's decision
The Federal Reserve's interest rate announcement is a few minutes away. Here's a snapshot of where the markets stand.
U.S. stocks: The S&P 500 is up 1.1%, and the Nasdaq Composite has gained 1.8%. The Dow Jones Industrial Average has added more than 200 points.
Bonds: The 10-year Treasury yield is at 3.398%, down about 8 basis points. One basis point is equal to 0.01%.
Gold: Gold futures are trading at $1,822.0 an ounce, up about 0.4%.
Currencies: The dollar index is at 105.34, down about 0.1%. The euro is down about 0.1%, at 1.0403 per dollar.
Bill Ackman predicts a 75 basis point rate hike as Fed pledges aggressive action
Pershing Square's Bill Ackman is calling on the Federal Reserve to act aggressively so the central bank can regain credibility in its fight against soaring inflation.
On Wednesday before the Fed decision at 2 p.m. ET, Ackman gave his prediction in a tweet, anticipating that the Fed "raises 75 bps, expresses a high level of concern about inflation and inflationary expectations, and makes clear that nothing is off the table for July including 100 bps or more if necessary."
The hedge fund manager also said a series of one percentage point increment hikes would be more efficient to ease inflation and the markets can recover sooner.
— Yun Li
Atlanta Fed's GDPNow estimates no growth in second quarter
A real-time reading of economic growth from the Atlanta Federal Reserve has declined again on Wednesday, reflecting the slowing U.S. economy and fanning fears of a potential recession.
After a weaker-than-expected retail sales report for May, the GDPNow tracker now shows 0% growth for the second quarter.
If that comes to pass, this will mark the second straight quarter with flat or negative GDP growth. In the first quarter, GDP growth was negative, though largely due to a higher-than-usual difference between imports and exports.
With inflation running at its highest level since the early 1980s, the Federal Reserve is raising rates despite slowing economic growth. That dynamic has led many on Wall Street to predict a recession either later this year or in 2023.
Consecutive quarterly declines in GDP often coincide with official recessions, though that standard is not part of the official definition used by the National Bureau of Economic Research.
— Jesse Pound
The Federal Reserve is expected to announce a 0.75 percentage point rate hike – the biggest since 1994
The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point – a move the central bank hasn't made since 1994. The move would raise the federal funds rate to a range of 1.5% to 1.75%.
Central bank officials are also expected to reveal their outlook for interest rates through its "dot plot" of individual members' expectations. The Fed will also update its expectations for gross domestic product, inflation and unemployment.
The Fed's rate announcement comes at a time when inflation is running at its highest pace since December 1981.
Read more here.
-Darla Mercado, Jeff Cox