Federal Reserve Push Interest Rates To 22 Year High

Federal Reserve Push Interest Rates To 22 Year High

Wednesday 26th July 2023 – 21:55 (BST)

GBP/USD pushed back towards the $1.30 range following hawkish comments by the Federal Reserve during its latest meeting in Washington on Wednesday. The central bank has raised its base rates by a widely anticipated 25bps to reach 5.25% – 5.5% for the first time since January 2001.

Policymakers still expect a level of 5.6% to be reached by the end of the year, despite US inflation falling sharply to 3% during June compared to 9% twelve months ago.

In a press conference following the decision, Fed Chairman Jerome Powell refused to be drawn on whether the Fed would increase rates again at its next meeting in September;

“I would say it is certainly possible that we would raise funds again at the September meeting if the data warranted,” he said. “And I would also say it’s possible that we would choose to hold steady at that meeting. We’re going to be making careful assessments . . . meeting by meeting.”

Markets are now factoring in a 50/50 chance of a 25bps increase in September, however falling US inflation and robust economic data could easily change this stance in the meantime.