Political | Process

The central bank suggested that it will further raise borrowing costs throughout this year as it attempts to undo its pandemic-era, easy money policies. The policy-setting Federal Open Market Committee also detailed plans on unwinding its nearly $9 trillion balance sheet.

During a press conference after the announcement, Fed Chairman Jerome Powell said the Fed has the “tools we need and the resolve it will take” to bring down inflation.

“The economy and the country have been through a lot over the past two years and have proved resilient,” Powell said. “It is essential that we bring inflation down if we are going to have a sustained period of strong labor market conditions that benefit all.”

The aggressive move by the Fed this week was expected, with investors already pricing in the half-point hike. Powell has been messaging that the move was coming over the past several weeks and has taken an increasingly hawkish tone when speaking about monetary policy.

Also Wednesday, the Fed announced it would begin shrinking its balance sheet by $60 billion in Treasuries and $35 billion in mortgage-backed securities each month. The central bank had previously been buying $120 billion of Treasury and mortgages securities each month in an effort to pump liquidity into the market and shore up the economy as the pandemic raged.

The Fed statement noted that it is paying attention to a number of geopolitical risks, noting that COVID-related shutdowns in China are “likely to exacerbate supply chain disruptions.” The FOMC said it is continuing to monitor the economic implications of the invasion of Ukraine by Russia, which may add “additional upward pressure” on inflation.

The decision was unanimously agreed to among the voting members of the committee.

The Fed also officially unveiled a strategy to shrink its asset holdings, after buying trillions of dollars in U.S. Treasuries and agency mortgage-backed securities to contain COVID’s impact on financial markets.