After two decades of never raising policy rates by more than 25 basis points at a time, the US Federal Reserve is now confronting macroeconomic conditions that demand more robust action. If the Fed proceeds too slowly, it will jeopardize its own credibility.
NEW YORK – So far this century, the US Federal Reserve has been relentlessly gradualist about increasing the federal funds rate. Since its last 50-basis-point rate hike in May 2000, the Fed has increased its policy target (now its target range) by only 25 bps at a time. It was not always like this. After moving to rate targeting in late 1982, the Fed hiked the federal funds rate by over 1% on one occasion, by 75 bps on three other occasions, and by 50 bps on nine other occasions.
NEW YORK – So far this century, the US Federal Reserve has been relentlessly gradualist about increasing the federal funds rate. Since its last 50-basis-point rate hike in May 2000, the Fed has increased its policy target (now its target range) by only 25 bps at a time. It was not always like this. After moving to rate targeting in late 1982, the Fed hiked the federal funds rate by over 1% on one occasion, by 75 bps on three other occasions, and by 50 bps on nine other occasions.