LONDON (ShareCast) - (Sharecast News) - The Federal Reserve followed through on its recently accelerated timeline for tightening policy but indicated that even faster rate hikes were unlikely.
As expected, the Federal Open Market Committee raised its target range for the Fed funds rate by 50 basis points to between 0.75-1.0% and said that from 1 June it would begin running-off debt instruments from its $8.9trn balance sheet at a monthly pace of $47.5bn.

At his presser, Fed chairman, Jerome Powell, explained that: "inflation is much too high and we understand the hardship it is causing and we are moving expeditiously to bring it back down."

And unlike what at least some analysts were anticipating, Powell added that 75bp rate hikes were not being considered, although there was "a broad sense on the committee that additional 50 basis-point increases should be on the table for the next couple of meetings."

Stocks snapped higher on the back of the announcement, while the US interest rate curve steepened a little with the yield on the benchmark two-year US Treasury note dropping nine basis points to 2.86%.

The US dollar dipped in response to the headlines coming out of the FOMC.

Policymakers had been expected to decide to start running off the Fed's balance sheet at a monthly pace of $35bn and to hike the Fed funds target range by 50bp at each of the three following meetings.

Wednesday's rate hike was the largest single move since May 2000 and a 75bp increase would have marked the biggest since 1994.

The Fed also said that ""to ensure a smooth transition, the committee intends to slow and then stop the decline in the size of the balance sheet when reserve balances are somewhat above the level it judges to be consistent with ample reserves."

At the start of March, Powell had told lawmakers that the process of balance sheet run-off might take roughly three years to complete.

Commenting on the Fed's decision, economists at Lloyds Bank said: "All central banks face a dilemma right now over how much relative weight to give to inflation or growth concerns, but it seems clear that the Fed is much more focused on the inflation risks."

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