Fed Hikes Rates Sharply by 0.75 Percentage Points to Curb Inflation

On June 15, the Federal Reserve (Fed) announced a rate hike of 0.75 percentage points, the largest rate hike since 1994. The Fed said the largest rate hike in decades was to curb the current rampant inflation in the United States.

After weeks of speculation, the Federal Reserve decided to move its benchmark funds rate to a range of 1.5%-1.75%, This is the highest level before the start of the CCP Virus pandemic in March 2020.

Fed Chairman Jerome Powell said at a post-meeting press conference that he did not want such sharp interest rate hikes to occur frequently, but he expected the Federal Reserve to raise interest rates again in July, by about 50-75 basis points.

Powell and his colleagues have come under fire for their slow response to the fastest inflation in four years, with Powell’s decision on the 15th to curb inflation by raising the target range for the federal funds rate to 1.5% to 1.75%.

The Fed forecasts that the target range for the federal funds rate will rise above 3% by the end of this year and 3.75% by the end of 2023.

A University of Michigan survey showed consumer inflation expectations continued to rise. Respondents expect inflation to rise 5.4% in the coming year, reaching its highest level since 1981. The Fed said it would be firmly committed to returning inflation to its 2 percent target.