On Wednesday afternoon, the U.S. Federal Reserve increased its federal funds rate by 34 of a percent point. The central bank’s move follows the consumer price index (CPI) report last week that showed U.S. inflation jumped last month by 8.3% per annum.
Fed Raises Federal Funds Rate by 75bps anticipates ‘Ongoing Increases’
The benchmark rate for the U.S. bank was raised by Jerome Powell, Fed Chair and U.S central bank governor on September 21st 2022 (bps). The Fed’s federal funds rate is now coasting along at 3.25%. The decision follows the recent CPI report published by the U.S. Bureau of Labor Statistics and Fed officials like Powell noting that that the American economy may feel “some pain.”
The Fed’s 75bps rate hike is the third three-quarters of a percentage point raise in a row. During the last rate hike, senator Elizabeth Warren (D-Mass) said if the Fed wasn’t careful the central bank could “trigger a devastating recession.”
Before the July 75bps rate rise, the U.S. central banking raised the federal funds rates by three quarters of an inch on June 15, 2022. The Fed’s largest rate hike was made since 1994 when Alan Greenspan, the thirteenth chairman of the Federal Reserve, formally authorized the 75bps increase.
On Wednesday, the Fed said: “The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate.”
Fed also added:
The committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Many economists and investors think the markets already knew about the rate hike. Prior to the Fed’s three-quarters of a percentage point hike, a few economists and analysts predicted there was a slight chance the U.S. central bank would raise the rate by a full-percentage-point (100bps).
Do you agree with the Fed increasing the federal funds rate 75bps by Wednesday afternoon? Comment below to let us know your thoughts on this topic.
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