Breaking: Fed hikes policy rate by 25 bps to 5-5.25% as expected

The US Federal Reserve (Fed) announced on Wednesday that it raised the policy rate, federal funds rate, by 25 basis points to the range of 5-5.25% following the May policy meeting. This decision came in line with the market expectation.

In its policy statement, the Fed dropped language that it 'anticipates' more policy firming may be appropriate to attain 'sufficiently restrictive' stance.

Follow our live coverage of the Fed's policy announcements and the market reaction.

Market reaction

With the initial reaction, the US Dollar came under renewed bearish pressure and the US Dollar Index declined toward 101.00.

Key takeaways from the policy statement

"In determining the extent to which additional policy firming may be appropriate, will take into account tightening to date, policy lags and other developments."

"US banking system is sound and resilient."

"Tighter credit conditions likely to weigh on economy, hiring and inflation."

"Job gains have been robust, inflation remains elevated."

"Will continue reducing balance sheet as planned."

"Vote in favor of policy was unanimous."