This is why everybody was watching the Fed

The Federal Reserve – Fed – boosted its benchmark interest rate goal by half a percentage point on Wednesday, marking the largest rise since May 2000.

The Federal Open Market Committee, which sets interest rates, said that its overnight interbank financing target rate will climb from 0.25 percent to 0.50 percent to 0.75 percent to one percent. In addition, the Fed said that the rate it pays on reserve holdings will be increased to 0.9 percent.

The Fed announced that on June 1 it will begin cutting its Treasury and mortgage bond holdings. In a plan announced alongside its monetary policy statement, the Fed stated that it will first reduce its Treasury holdings by $30 billion per month and its mortgage bond holdings by $17.5 billion.

The run-pace off’s will quadruple to $60 billion in Treasuries and $35 billion in mortgage bonds after three months at current rate.

June Fed meeting

After the Federal Reserve Chair Jerome Powell minimised the chance of an even higher interest rate hike after announcing the steepest rate hike since 2000, the Dow Jones Industrial Average rose more than 900 points and the S&P 500 gained the most in two years on Wednesday.

Concerns that the Fed might hike its benchmark interest rate by three-quarters of a percentage point at its next meeting in June were allayed by the remarks, which came after the central bank revealed its intention to boost it by double the customary amount.

The S&P 500 rose 3%, its biggest day since May 2020. This week, the benchmark index has gained 4.1 percent, about half of its monthly loss in April. The Dow increased by 2.8 percent, while the Nasdaq increased by 3.2 percent. Earlier in the day, all of the indices had been in the red.