The Federal Reserve announced its second rate hike of 2022 to increase the benchmark interest rate from 0.50% to 1.00%. This is the first 50 basis point hike since 2000 and the first time the central bank raised rates in back-to-back meetings since 2006.

There is a new hope that these rate hikes will be able to return inflation numbers back to the Fed’s 2.00% inflation target rate. The most recent US inflation report was the highest since the 1980’s at +8.50% year-over-year.

The Federal Open Market Committee also announced that it has reduced their holdings of Treasury securities, agency debt, and mortgage-backed securities from $8.96 trillion dollars to $8.94 trillion dollars. This is a very marginal change, but it is worth noting that the balance sheet has stopped growing which the Fed pledged to do at their last meeting in March.

The Fed’s next meeting is scheduled for June 15, 2022, where they could potentially announce another 0.50% rate hike depending on economic conditions. If they do raise rates by another 0.50%, it will be the first time since 1989. The market is pricing in five more rate hikes this year which would put the target rate between 3.00% and 3.25%.

The Cash Management Group is committed to staying on top of interest rates in the US and Canada to provide their clients with the most up-to-date information and effective interest rate hedging solution. If you have any questions about today’s Market Update, you can call us at 604-643-0101 or email cashgroup@cgf.com