As was widely expected, the U.S. Federal Reserve raised its benchmark interest rates by 75
basis points to counter inflation.
The Federal Open Market Committee lifted its trendsetting interest rate to a range of 1.5% to
1.75%, the highest level since before the pandemic began in March 2020. The three quarter of a
percentage point increase is the biggest one-time rate hike by the U.S. central bank since 1994.
Stocks rallied after the interest rate increase, and as Federal Reserve Chairman Jerome Powell
said that the central bank is prepared to act more aggressively to dampen inflation that is
running at its highest level since 1981 in America.
“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of
this size to be common,” Powell said during his news conference. He added that he expects the
next Fed meeting in July to see another rate increase of 50 or 75 basis points, and said
decisions on interest rates are being made “meeting by meeting.”
The Federal Reserve’s benchmark interest rate is expected to end the year at 3.4%, according
to the midpoint of the target range of individual members of the Federal Open Market
Committee. The committee then sees the Fed’s benchmark rate rising to 3.8% in 2023, a full
percentage point higher than what was expected this past March.
The Federal Reserve also significantly lowered its outlook for 2022 economic growth, saying it
now anticipates a 1.7% gain in U.S. gross domestic product (GDP), down from a forecast of
2.8% economic growth made in March of this year.
