One thing which every equity or a debt investor, every money manager and every advisor has followed throughout year 2022 is Fed’s stance, and its consistent rate hikes. For those who have witnessed this in the past remember how Fed brought rates down to 0% from as high as 4.75% after GFC. The same is reversing now, so remembering history is important to understand the present and projecting the future.


To aid the U.S. economy in coping with the effects of the GFC, in an unprecedented move, the Fed cut interest rates to zero in late 2008. The Fed started executing quantitative easing, i.e., QE, when rates were lowered to zero. It started purchasing bonds worth trillions of dollars to boost the economy and put Americans back to work after it was unable to lower interest rates any further.

FOMC Meeting Date Rate Change (bps) Fed Funds Rate
December 16, 2008 -100 0% to 0.25%
October 29, 2008 -50 1.00%
October 08, 2008 -50 1.50%

2008 Fed Rates Cuts: The Great Recession

FOMC Meeting Date Rate Change (bps) Fed Funds Rate
April 30, 2008 -25 2.00%
March 18, 2008 -75 2.25%
January 30, 2008 -50 3.00%
Jan 22, 2008 -75 3.50%
December 11, 2007 -25 4.25%
October 31, 2007 -25 4.50%
September 18, 2007 -50 4.75%

Fed Rate Cuts 2007 to 2008: The Housing Market Crash



Seven years later, when the economy slowly started to revive, the central bank cautiously started hiking interest rates. Under the former Fed Chair Janet Yellen, the first rate increase occurred in December 2015. The next rate increase did not occur for another year, but rather in December 2016. In December 2015, core PCE inflation was 1.1%, significantly below the Fed’s objective. Not until March 2018 did it reach 2%. Fed didn’t hit 2.50% with this steady rate rise until December 2018.

In what Powell referred to as a “mid-cycle adjustment,” the Fed dropped interest rates by a quarter of a percentage point three times in 2019. Simply put, the Fed was lowering interest rates in the middle of the traditional expansion-to-recession business cycle.

FOMC Meeting Date Rate Change (bps) Fed Funds Rate
December 20, 2018 +25 2.25% to 2.50%
September 27, 2018 +25 2.00% to 2.25%
June 14, 2018 +25 1.75% to 2.00%
March 22, 2018 +25 1.50% to 1.75%
December 14, 2017 +25 1.25% to 1.50%
June 15, 2017 +25 1.00% to 1.25%
March 16, 2017 +25 0.75% to 1.00%
December 15, 2016 +25 0.50% to 0.75%
December 17, 2015 +25 0.25% to 0.50%

Fed Rate Hikes 2015 to 2018: Returning to Normalcy


2019 – 2020

In 2019, the Federal Reserve was afraid that a trade war between the United States and China would hurt the economy and raise unemployment rates. The economy benefited from three modest rate cuts in the second half of 2019.

At the time, inflation was significantly below the central bank’s 2% target. Comparing June 2018 to June 2019, Core PCE increased by 1.7%. Only a 1.9% increase was seen by February 2020.

FOMC Meeting Date Rate Change (bps) Fed Funds Rate
October 31, 2019 -25 1.50% to 1.75%
September 19, 2019 -25 1.75% to 2.00%
August 01, 2019 -25 2.00 to 2.25%

2019 Fed Rate Cuts: Mid-Cycle Adjustment

Then COVID-19 happened and the pandemic swept over the world in a matter of weeks. Lockdowns were imposed to stop the virus’s spread and in April 2020 alone, there was a loss of about 20.5 million jobs, and the unemployment rate increased to 14.7%.

In two unexpected emergency sessions held in March 2020, the FOMC drastically reduced interest rates, restoring the federal funds target rate range of zero to 0.25%.

FOMC Meeting Date Rate Change (bps) Fed Funds Rate
March 16, 2020 -100 0% to 0.25%
March 03, 2020 -50 1.00% to 1.25%

2020 Fed Rate Cuts: Coping with Covid-19

The same Federal Reserve that acted quickly to lower interest rates during the coronavirus pandemic is currently waging the most aggressive campaign to hike borrowing costs in forty years. This is due to the Fed’s decision to act to combat inflation after inflation reached a 40-year high. It has acted firmly since and increased the fed funds rate by three percentage points in roughly six months.

The objective is to lower inflation rates that are depleting buying power without causing a recession.


FOMC Meeting Date Rate Change (bps) Fed Funds Rate
November 02, 2022 +75 3.75% to 4.00%
September 21, 2022 +75 3.00% to 3.25%
July 27, 2022 +75 2.25% to 2.50%
June 16, 2022 +75 1.50% to 1.75%
May 05, 2022 +50 0.75% to 1.00%
March 17, 2022 +25 0.25% to 0.50%

2022 Fed Rate Hikes: Taming Inflation

Although the final stance is unknown, the Fed probably isn’t finished yet. In the most recent meeting, Fed Chair Jerome Powell gave a hint that policymakers will likely raise interest rates above the 4.5–4.75 percent they had predicted in September, albeit they would do so in smaller increments. Rate increases of a slower half-percentage point and eventually a quarter-percentage point may result from this.

That wraps up the Fed’s behaviour over some of the key events in the past 15 years. And, this does covey that change in Fed Stance takes time, and it depends upon the focus. We believe that till end of this FY23, Fed’s focus is going to be Inflation and it will take time for inflation data to show the effect of rate hikes. But, from Q1 to Q2 of FY24, Fed’s focus should be back to growth and given the historical pattern, Fed can go aggressive in cutting rates as well.

What is evident today is that containing inflation is key, and we’ll have to deal with the results.

Industries will react by reducing spending, recruiting less (or some mass layoffs as seen across Meta, Twitter, etc), looking for new markets, concentrating on local opportunities, and reinventing themselves, which is already happening to some extent.

Watching how investors react to the new situation will be interesting and its implications on the global markets will be heavy, for sure, but, it will be worth watching, how India tackles this and how it comes out of it. These are tough times for sure, but this is also an opportune moment for India to emerge again. While Fed goes back in history to plan its moves, India, too, will repeat history as it resurges again, as the Golden Bird.

Since, markets work on forward thinking, investors need to be prepared and remember the quote from Warren Buffet, i.e., to be greedy when others are fearful and be fearful when others are greedy.


Do Not Simply Invest, Make Informed Decisions

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