Fed hikes interest rates by 0.75 percentage point for second consecutive time to fight inflation

cnbc.com:

The Federal Reserve on Wednesday enacted its second consecutive 0.75 percentage point interest rate increase as it seeks to tamp down runaway inflation without creating a recession. In taking the benchmark overnight borrowing rate up to a range of 2.25%-2.5%, the moves in June and July represent the most stringent consecutive moves since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s.

While the fed funds rate most directly impacts what banks charge each other for short-term loans, it feeds into a multitude of consumer products such as adjustable mortgages, auto loans and credit cards. The increase takes the funds rate to its highest level since December 2018.Markets largely expected the move after Fed officials telegraphed the increase in a series of statements since the June meeting, and held on to gains after the announcement.

Central bankers have emphasized the importance of bringing down inflation even if it means slowing the economy. In its post-meeting statement, the rate-setting Federal Open Market Committee cautioned that «recent indicators of spending and production have softened.» «Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low,» the committee added, using language similar to the June statement.

Officials again described inflation as «elevated» and ascribed the situation to supply chain issues and higher prices for food and energy along with «broader price pressures.» The rate hike was approved unanimously. In June, Kansas City Fed President Esther George dissented, advocating a slower course with a half percentage point increase.