This is the biggest escalation in two decades.

As expected by the market, the United States Federal Reserve (Fed), the country’s central bank, raised the interest rate by 50 basis points on Wednesday, being the largest escalation in two decades,

The Fed made this decision in an effort to control runaway inflation in the United States.

Thus, with this increase, the reference rate in the US economy is located in a range of 0.75% to 1%, according to the official statement issued at the end of a two-day meeting of the Federal Reserve Monetary Policy Committee. .

In addition, the Fed also announced that it will start reducing its bond holdings starting June 1st.

It is an escalation of rates with which it reaches the range of 1%, in an attempt to curb US inflation, which is at 8.5%

As expected by the market, the US Federal Reserve raised interest rates by 50 basis points, to curb the highest inflation in decades. Unlike the March meeting, the central bank did not provide a dot plot update or a summary of projections, meaning much of the risk in the revision stems from comments by Chairman Jerome Powell.

“The Committee seeks to achieve maximum employment and inflation at a rate of 2% over the long term. With the appropriate reaffirmation of the monetary policy stance, the Committee expects inflation to return to its 2% target and the labor market remain strong,” the Fed report says.

Backed by the United States Treasury
US Treasury Secretary Janet Yellen said she expects strong growth in the coming year, with a possible “soft landing” for the economy as the Federal Reserve moves to reduce inflation. “I think we’ll see solid growth next year,” Yellen said. “The Fed will have to be clever and also lucky, but I think it’s a possible combination.”

Several economists have forecast a recession in 2023 as the Fed raises interest rates, even with a half percentage point hike anticipated later on Wednesday. But Yellen said “a soft landing is possible.”

The Treasury chief said that while consumer prices have risen, medium-term inflation expectations have not been affected as much. That means this is a different kind of inflation than former Fed Chairman Paul Volcker faced, Yellen said. Volcker tightened monetary policy so aggressively in the early 1980s that it caused a deep recession.

Fewer debt securities will be sold
The US Treasury cut its quarterly sale of long-term debt for the third straight time and unexpectedly warned it could make further cuts, citing “solid” federal tax revenue.

Los operadores esperaban ampliamente la reducción de la venta de notas y bonos de la próxima semana, pero consideraban que probablemente sería el último recorte antes de la medida de la Reserva Federal para reducir sus US$5,8 billones de reservas del Tesoro. La Fed también cambiará el plan de reducción de la cartera de bonos el miércoles, y se cree que ese proceso obligaría al Tesoro a tener que vender más deuda al público.

El Departamento del Tesoro dijo en un comunicado que venderá US$103.000 millones en valores a largo plazo en subastas la próxima semana, US$7.000 millones menos que en febrero. Esto marca la serie más larga de recortes trimestrales desde el ciclo 2014-2015. En un anuncio sorpresivo para algunos operadores, también está recortando las ventas de las subastas de instrumentos a dos, tres y cinco años en los próximos meses.

“Los planes de emisión anunciados hoy dejan al Tesoro bien posicionado” con respecto al endeudamiento necesario, dijo el departamento en su comunicado. Sin embargo, “pueden ser necesarias reducciones adicionales en trimestres futuros dependiendo de la evolución futura de las necesidades de endeudamiento proyectadas”.