The Fed announced a 0.25% raise to the cash rate, and all eyes were on them with this one.
👉 Background: The Federal Reserve in the US is similar to the Reserve Bank of Australia - it’s the central bank of the United States.
👉 What happened: As the largest economy in the world, the movements in the US have ripple effects across the whole world. And yesterday, in one of the Fed's eight meetings, they announced a 0.25% raise to the cash rate - which takes the rate to 5%.
👉 What else: All eyes were on the Fed with this one. They needed to be very careful with this rate rise given the current uncertainty in the whole US banking system.
💡 The Federal Reserve finds itself between a rock and a hard place for this rate rise. We know that the US is facing its worst banking crisis since 2008 and is facing the highest inflation rate in a generation.
💡People be thinking: If the Fed is pausing rates, at a time when there is such high inflation, then something must really be wrong. So the Fed took action - which causes a hell of a lot of pain for mortgage holders in the US.
💡The one saving grace is that they removed the phrase “ongoing rate increases” from their policy statement. And this had been present since the start of the rate rises in 2022.
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