The Federal Reserve Raises Interest Rates By 0.75 of a Percentage Point
The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, its biggest move since 1994, as the central bank ramps up its efforts to tackle the fastest inflation in four decades. From a report: The big rate increase, which markets had expected, underlined that Fed officials are serious about crushing price increases even if it comes at a cost to the economy. Officials predicted that the unemployment rate will increase to 3.7 percent this year and to 4.1 percent by 2024, and that growth will slow notably as policymakers push borrowing costs sharply higher and choke off economic demand. The Fed's policy rate is now set in a range between 1.50 to 1.75. Policymakers penciled in interest rates hitting 3.4 percent by the end of 2022 -- a level that would be the highest since 2008 -- and officials saw their policy rate peaking at 3.8 percent at the end of 2023. Those figures are significantly higher than previous estimates, which showed rates topping out at 2.8 percent next year. Fed officials newly expected to be cutting rates in 2024, which could be a sign that they think the economy will weaken so much that they will need to reorient their policy approach. The major takeaway from the Fed's economic forecasts, which it released for the first time since March, was that officials have become more pessimistic about their chances of letting the economy down gently.
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