The US Federal Reserve (Fed) raised interest rates by 25 basis points today, marking the first rate hike in the US since before the COVID-19 pandemic. The increase was in line with what the central bank has long communicated to the market that it would do. (This is a developing story and is being constantly updated.)

“[…] the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting,” the Fed’s announcement said.

The price of bitcoin (BTC) dropped immediately following the announcement, trading down by 1.3% to USD 39,900 in the first five minutes after the release of the Fed’s statement. At the same time, the US S&P 500 stock index dropped 0.5%.

The increase in the interest rate was also widely expected by analysts, who have long argued that the Fed must raise rates in order to get the recently high inflation in the US under control.

Last month, inflation in the US reached 7.9%, its highest level since January 1982. The level is well above the Fed’s stated goal of keeping inflation at 2% per year “over the longer run.”

The decision today comes after Fed Chairman Jerome Powell told Congress earlier in March that the central bank would “proceed carefully” with its plan to hike interest rates this year despite the war in Ukraine.

US Federal Fund Rate 25-year chart:

Before the war broke out, some economists expressed uncertainty as to whether the Fed would raise rates by 50 basis points at today’s meeting instead of 25, given the high level of inflation. With