The Federal Reserve raised rates by 50 basis points on Wednesday, its first rate hike of at least half a percentage point in more than 20 years. The broader markets surged following the hike as a more hawkish Fed should help to cool record inflation.
The Fed also signaled it plans to reduce its trillions of bond holdings at a slower pace than it previously indicated just a month before, Benzinga's Mitch Hoch pointed out Wednesday evening on "Money Mitch."
"They're not just going to sell them immediately because they are trying to give what? A soft landing," Hoch said.
What To Know: The Money Mitch host noted the Fed minutes from March showed Fed officials favored reducing bond holdings by $95 billion per month. But Wednesday's Fed meeting showed a change of course.
"For Treasury securities, the cap will initially be set at $30 billion per month and after three months will increase to $60 billion per month," the Federal Reserve said.
See Also: Powell Says More Hikes Are Likely Coming, But US Economy Is 'Well Positioned' To Handle Them
For agency debt and agency mortgage-backed securities, the Fed said the cap will initially be set at $17.5 billion per month and will increase to $35 billion per month after three months.
"This wasn't given in his speech. This was given by the press release and I think this is the important part" Hoch said, adding that the Fed can change its mind at any moment.
He highlighted the Fed's intentions to slow and then stop the decline in the size of the balance sheet when reserve balances reach the level it decides is consistent with ample reserves.
"If you notice, they never said anything about $90 billion or $95 billion. This is where the story changes and now you are seeing the stocks start booming. This ... I think, is the reason that you started seeing the lift."
See the full episode here:
Photo: Federalreserve from Flickr.
