(Fed) The Federal Reserve has raised the key interest rate by 0.75 percentage points in a move to confront the inflation rate, which is hovering around a four-decade high.
Following the increase, the benchmark policy rate was lifted to a target range of between 1.50 and 1.75 percent.
The rate increase was the biggest since 1994, with the central bank’s chair Jay Powell noting that the decision was prompted by skyrocketing inflation. The central bank had initially earmarked a 0.50 percentage point increase.
Powell said another increase of 0.50 or 0.75 percentage points was likely at its next meeting, although he insisted that such hikes are uncommon.
The Fed is now projected to hike rates to 3.4% by the end of 2022, with additional increases in 2023 that could take the rate to 3.8%.
Powell admitted that the process of economic tightening, which also includes scaling back the $9 trillion balance sheet, would involve “some pain.” The central bank cut the growth forecast to 1.7% this year compared to the prior 2.0%.
The central bank expects the core inflation to end the year at 4.3% before cooling to 2.7% in 2023.
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