Fed hikes its benchmark interest rate by 0.75 percentage point, the biggest increase since 1994
The Federal Reserve on Wednesday launched its biggest broadside yet against inflation, raising benchmark interest rates three-quarters of a percentage point in a move that equates to the most aggressive hike since 1994. Ending weeks of speculation, the rate-setting Federal Open Market Committee took the level of its benchmark funds rate to a range of 1.5%-1.75%, the highest since just before the Covid pandemic began in March 2020.
Stocks gave up some of their gains in the wake of the decision, which followed its two-day policy meeting.
«Clearly, today's 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,» Fed Chairman Jerome Powell said at his post-meeting news conference. He added, though, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made «meeting by meeting» and the Fed will «continue to communicate our intentions as clearly as we can.»
Additionally, members indicated a much stronger path of rate increases ahead to arrest inflation moving at its fastest pace going back to December 1981, according to one commonly cited measure.
The Fed's benchmark rate will end the year at 3.4%, according to the midpoint of the target range of individual members' expectations. That compares with an upward revision of 1.5 percentage points from the March estimate. The committee then sees the rate rising to 3.8% in 2023, a full percentage point higher than what was expected in March.
Officials also significantly cut their outlook for 2022 economic growth, now anticipating just a 1.7% gain in GDP, down from 2.8% from March. The inflation projection as gauged by personal consumption expenditures also rose to 5.2% this year from
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