As Expected The Fed Adds a 1/4 of a Point

the staff of the Ridgewood blog

Washington DC, the US Federal Reserve did what almost everyone expected  it would do, raising interest rates by a quarter percentage point and hinting it could be the final move in its tightening campaign. With a slight tweak to its language, the central bank signaled that the time to step back and watch may have finally arrived.

After a late start Fed Chair Jerome Powell has made it his mission to thread the needle of a soft landing in a quest to “normalize” interests rates . The question now is whether the inflation fight went too far, or not far enough, or ends up being just right in the much hoped for Goldilocks scenario .

Throw in the wild cards of the banking crisis and the predictable fight over the debt ceiling  and it may make for an interesting summer .

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The US Federal Reserve has been managing interest rates for more than a century, and over that time, interest rates have gone through a number of cycles, ranging from high inflationary periods to low periods of economic growth. Here is a brief overview of US interest rates over the past 100 years:

• 1920s: Interest rates during the 1920s were relatively low, with the average rate on a 10-year US Treasury bond hovering around 4%. However, interest rates spiked during the stock market crash of 1929 and the subsequent Great Depression.
• 1930s and 1940s: In an effort to combat the economic depression of the 1930s, the Federal Reserve kept interest rates low and pursued a policy of monetary expansion. Interest rates remained low through World War II and the post-war era, with the average rate on a 10-year US Treasury bond hovering around 2% during the 1940s.
• 1950s and 1960s: During the 1950s and 1960s, interest rates gradually began to rise, as the US economy expanded and inflation began to creep up. The average rate on a 10-year US Treasury bond during this period was around 4%.
• 1970s: In the 1970s, interest rates experienced a period of rapid inflation and volatility, with the average rate on a 10-year US Treasury bond soaring to nearly 9% by the end of the decade.
• 1980s: In the early 1980s, the Federal Reserve implemented a tight monetary policy to combat inflation, which led to a period of high interest rates. The average rate on a 10-year US Treasury bond peaked at around 15% in 1981, before gradually falling over the course of the decade.
• 1990s: Interest rates continued to decline throughout the 1990s, as the US economy experienced a period of sustained growth and low inflation. The average rate on a 10-year US Treasury bond during this period was around 6%.
• 2000s: Interest rates remained relatively low in the early 2000s, with the Federal Reserve keeping the federal funds rate (the interest rate at which banks lend to each other) at historic lows in an effort to boost the economy after the dot-com bust. However, interest rates began to rise again in the mid-2000s, as the housing market boomed and inflationary pressures mounted.
• 2010s: In the wake of the 2008 financial crisis, the Federal Reserve once again implemented a loose monetary policy, keeping interest rates at historic lows in an effort to stimulate the economy. Interest rates remained low throughout most of the decade, before beginning to rise again in the late 2010s.
• 2020s: In response to the economic impacts of the COVID-19 pandemic, the Federal Reserve cut interest rates to near-zero levels and implemented a number of other monetary stimulus measures. As of early 2023, interest rates remain low, but the Federal Reserve has indicated that it may begin to gradually raise rates in the coming years.