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Fed Increases Interest Rate by 75-Basis Points

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Fed Increases Interest Rate by 75-Basis Points

On Wednesday, the Federal Reserve raised by 75 basis points its interest rate benchmark for the first time in almost 30 years. This comes as policymakers step up their fight to tame inflation, but it’s also a move that may slow the growth of the U.S. economy and exacerbate the financial pressure on the people.

The 75-basis point hike announced is the first since 1994, underscoring the Fed officials’ seriousness in tackling inflation following several alarming economic reports.

This move places the key benchmark federal funds rate between 1.50% and 1.7%, the highest since the start of the pandemic in 2020.

Fed Interest Rate May Reach 3.4% by End of 2022

Officials also presented an aggressive path of rate hikes for the rest of 2022. New economic progressions published following the two-day meeting revealed policymakers expect interest rates to reach 3.4% by the end of the year – the highest level since 2008.

In comparison, March’s estimate revealed that officials has noted rates may hit 2.5% by the end of the year.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures,” the Fed stated in its post-meeting statement.

Stocks rallied after the release of the Fed’s statement, approved by all FOMC members other than Kansas City President Esther George, who wanted a more tame, half-point hike.

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