Central Bank tees up biggest rate hike in 22 years while selling off $9trillion bond holdings as US braces for spike in borrowing costs
Fed will announce its new policy on interest rates at 2pm on Wednesday
Central bank is widely expected to raise interest rates by half a percentage point
Also expected to begin reducing the size of its $9 trillion balance sheet
The long-awaited moves are intended to battle inflation which hit 8.5% in March
Markets will be watching closely for signals of the future rate-hike path
Fed Chair Jerome Powell has been under pressure to act on inflation for a year
Turmoil on Wall Street is a feature, not a bug, of the Federal Reserve’s fight against inflation, according to former New York Federal Reserve President Bill Dudley.
“What’s happening right now is exactly what the Federal Reserve wants to happen,” Dudley told CNN in an interview, referring to recent volatility in the financial markets.
Turbulence on Wall Street has increased as investors worry about a potential recession and brace for a series of interest rate hikes from the Federal Reserve. The S&P 500 lost more than 13% of its value between January and April, marking its worst start to a year since 1939.
“They want a weaker stock market. They want higher bond yields,” Dudley said. “The stock market I think is finally catching onto that.”