As predicted, the Federal Reserve (Fed) agreed to increase interest rates by 75 basis points for the fourth time in a row and also indicated a potential change in the way it will set monetary policy.
The move continued the most aggressive pace of policy tightening since the early 1980s that brought the Fed funds rate up to a target range of 3.75%-4.00%, the highest level in 14 years.
Following the decision, the Fed said it will take into account the cumulative tightening of monetary policy, the effects affecting activity and inflation as well as economic and financial developments in determining the rate of increase in the future.
This in turn triggered expectations of a 50 basis point hike at the next policy meeting in December, causing the US dollar to tumble and US 10-year bond yields to move lower, while stocks were higher.
However, the situation in the market changed again after investors heard Chairman Jerome Powell's statement which was in fact still hawkish.
Powell stressed that it is "very" too early to think that the Fed will pause for a moment in raising interest rates because inflation needs to be brought down decisively.
Although admitting that slowing the rate of increase will 'become necessary at some point', but it may also take time for inflation to come down. Thus, the strict policy stance should remain for some time.
Powell also said that the Fed still has some steps to take and the data coming in since their last meeting shows that the key interest rate level will be higher than previously expected.
As a result, the US dollar, which initially plunged, soared high again and the Wall Street market declined.
