The Fed Hikes by 0.75%

The Federal Reserve decided to raise interest rates by 0.75%. The new range for the Fed funds rate is 1.5% to 1.75%. This is the first time since 1994 that the Fed has increased rates by this much.

Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.

The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.

The Fed said it plans to continue to raise interest rates. The median forecast sees rates at 3.4% by the end of this year, and 3.8% by the end of next year. The cut has also cut back on its estimate for economic growth for this year, and it sees unemployment rising by a little bit.

The Fed sees inflation for this year at 5.2%, but it sees inflation falling to 2.2% by 2024. Esther George dissented from today’s statement. She wanted to see an increase of 0.5%.

Posted by on June 15th, 2022 at 2:07 pm


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