The U.S. Federal Reserve hiked the Fed Funds rate by 25 basis points on Wednesday, the first rate hike since 2018.

While this move was largely anticipated, the markets still rallied on the news; both the stock markets and safe haven assets like gold rose. The dollar fell slightly.

Steve Hanke, professor of Applied Economics at Johns Hopkins University told David Lin, anchor for Kitco News, that the stock markets interpreted this news as quite dovish.

Additionally, gold rallied because the gold market understands that this 25 basis point hike won’t be enough to combat inflation, which is likely to remain in the 6% to 9% range until 2024.

“[Inflation] is definitely not transitory,” he said. “[People] are still droning on about supply chain problems, and the fact that those have not been fixed as fast as people thought they would be fixed, and that is the reason that inflation has been dragging on longer than people thought.”

Hanke stressed that the narrative that inflation has been caused by supply chain problems is simply false. Rather, inflation is caused by an increase in the money supply.