US Fed Raises Interest Rates to 20-Year High
US Fed Raises Interest Rates to 20-Year High
The Federal Reserve raised interest rates by 75 basis points on Wednesday, the largest increase since 1994, in an effort to combat inflation.
The move nudged the federal funds rate to a range of 5.25% to 5.5%, the highest level in 22 years. The Fed also said that it expects to continue raising rates at a “measured pace” in the coming months.
The decision was widely expected by economists, who have been calling for the Fed to take aggressive action to cool inflation. The Consumer Price Index rose 8.6% in May, the highest rate in 40 years.
The Fed’s decision is likely to have a significant impact on the economy. Higher interest rates will make it more expensive for businesses to borrow money, which could lead to slower economic growth. However, the Fed believes that the benefits of taming inflation outweigh the risks of a recession.
“The committee is strongly committed to returning inflation to its 2% objective,” Fed Chair Jerome Powell said in a statement. “We understand that high inflation imposes significant hardship, especially on those least able to afford the higher costs of essentials.”
The Fed’s decision is likely to be met with mixed reactions. Some businesses and consumers will welcome the move, as it will help to slow the pace of inflation. However, others will be concerned about the impact of higher interest rates on the economy.
Only time will tell whether the Fed’s decision will be successful in bringing inflation under control. However, the move is a clear sign that the Fed is serious about taking action to address this pressing economic issue.
Here are some of the key takeaways from the Fed’s decision:
- The Fed raised interest rates by 75 basis points, the largest increase since 1994.
- The federal funds rate is now in a range of 5.25% to 5.5%, the highest level in 22 years.
- The Fed expects to continue raising rates at a “measured pace” in the coming months.
- The decision is likely to have a significant impact on the economy, both positive and negative.
- The Fed is serious about taking action to address inflation.