Wednesday’s rate hike will push the federal funds rate to a range of 0.75%-1%.
Stocks rose following the announcement while Treasury yields backed off their earlier highs.in the coming months, with a possible 75-basis-point hike on the table for June.
The plan outlined Wednesday will see the balance sheet reduction happen in phases as the Fed will allow a capped level of proceeds from maturing bonds to roll off each month while reinvesting the rest. Starting June 1, the plan will see $30 billion of Treasurys and $17.5 billion on mortgage-backed securities roll off. After three months, the cap for Treasurys will increase to $60 billion and $35 billion for mortgages.
Finally, the statement addressed the Covid outbreak in China and the government's attempts to address the situation. Though some Federal Open Market Committee members had pushed for bigger rate hikes, Wednesday's move received unanimous support.
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