Fed issues biggest rate hike in 22 years


By Anneken Tappe, CNN Business

The Federal Reserve said Wednesday it is raising interest rates by a half-percentage point to get a handle on the worst inflation America has seen in 40 years.

It’s the first time in 22 years that the central bank has hiked rates this much. The decision was
unanimous, with all 12 members of the policy-setting Federal Open Market Committee agreeing on it.
In March, the Fed ramped up its benchmark borrowing rate for the first time since late 2018, increasing it
by a quarter-percentage point.
In his post-meeting press conference on Wednesday, Fed Chairman Jerome Powell said that additional
half-percentage-point rate hikes will be on the table for the next few meetings. But the bank isn’t looking
to go bigger:
“A 75 basis point increase is not something the committee is actively considering,” Powell told reporters.
“If inflation comes down we’re not going to stop, we’re just going to go down to 25 basis point
increases,” he added.

The Federal Reserve raises rates by 0.50%

Americans are struggling with rising costs everywhere from the grocery store to the gas pump. Keeping
prices stable is part of the Fed’s mandate, but so far inflation has kept creeping higher, leading some to
wonder if the central banks is behind the curve with its policy.
But Powell fought back against that point Wednesday.
He also started Wednesday’s press conference by addressing the American people, saying “inflation is
much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it
back down.”
But with the Russia-Ukraine conflict still raging, price pressures on food and energy are unlikely to abate
any time soon.
“The implications for the US economy are highly uncertain,” the Fed statement said. “The invasion and
related events are creating additional upward pressure on inflation and are likely to weigh on economic
activity.”
The bank also warned that the pandemic-related lockdowns in China will likely weigh on already
battered supply chains.
Together, these issues could put further pressure on consumer prices in the coming months.
But monetary policy tools are no quick fix. The Fed’s actions need time to take effect.
To tighten monetary conditions further, the central bank will also start rolling off its massive balance
sheet, which got bloated during the pandemic.
As of June, it will let $30 billion worth of Treasury securities and $17.5 billion worth of mortgage-backed
securities run off every month between June and August, before upping these amounts to $60 billion
and $35 billion, respectively, in September.(CNN / IM )
Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on DotNetKicks.com
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)

Leave a Reply

Your email address will not be published. Required fields are marked *