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The US Federal Reserve has raised the base interest rate to 5-5.25% per annum


May, 04 2023
watermark Economic news

Following the results of the May meeting, the US Federal Reserve raised the base interest rate by 25 basis points to the level of 5-5.25% per annum. This decision coincided with the forecasts of most analysts. The Fed also noted that a further rate hike would be appropriate, since the regulator still expects to achieve maximum employment in the economy and inflation at 2% in the long term. 


Thus, the regulator's rate reached the highest level since 2006: then it also reached 5.25% per annum. In March and February, the US central bank raised the rate by 25 bps and by 50 bps in December.


In addition, the Fed confirmed that it will continue to reduce assets on its balance sheet, following the plan published in May 2022. According to the plan, the reduction began on June 1: for the first three months it was planned to reduce assets by $47.5 billion per month, $30 billion of which falls on treasury securities, $17.5 billion – on mortgage securities. Then the rate of reduction should be doubled to $95 billion per month.


The US dollar reacted with a decline to the results of the central bank meeting. The euro/dollar exchange rate increased to 1.1092. The dollar's exchange rate against the yen fell to 134.15. And the dollar index (the exchange rate against a basket of currencies of six US trading partner countries) fell to 100.80 points.


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Foreign exchange trading carries a high risk of losing money due to leverage and may not be suitable for all investors. Before deciding to invest your money, you should carefully consider all the features associated with Forex, as well as your investment objectives, level of experience, and risk tolerance.