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Fed makes big rate hike, sees another big move this year

US central bank raises target interest rate by 75 basis points to range 3.00%-3.25%

The Federal Reserve on Wednesday raised its target interest rate by three-quarters of a percentage point to a range of 3.00%-3.25% and new projections signaled more big increases to come, bringing its policy rate up to 4.40%. increased. Strong inflation continued, before peaking at 4.60% in the year 2023.

Meanwhile, the US central bank’s quarterly economic projections showed the economy to slow to a crawl in 2022, with year-end growth of 0.2%, rising to 1.2% in 2023, well beyond the economy’s potential. is less. The unemployment rate is projected to rise to 3.8% this year and 4.4% in 2023. Inflation appears to be slowly returning to the Fed’s 2% target in 2025.

Rate cuts are not expected until 2024.

The federal funds rate projected for the end of this year signals an overall rate hike of another 1.25 percentage points to come at the Fed’s two remaining policy meetings in 2022, a level that could mean another 75-plus percentage points in the offing. Base-point increase.

In a statement announcing its third consecutive 75-basis-point increase, the Fed said, “The Committee remains strongly committed to returning inflation to its 2% objective, which is significantly higher than the quarter-percentage-point increase.” It’s Fed.

The Fed “expects that ongoing increases in the target range would be appropriate,” its policymaking Federal Open Market Committee statement said, reiterating language from its previous statement in July.

Updated projections point to an extended Fed fight to suppress the highest bout of inflation since the 1980s, and one that potentially pushes the economy to at least one recession borderline.

The Fed said that “recent indicators point to modest growth in spending and output,” but the economy is still seen as slowing to a sluggish pace this year, with just 0.2% growth at the end of the year .

The unemployment rate rose from 3.8% at the end of 2023 to 4.4% at the end of 2023, meanwhile, well above the half-percentage-point increase in unemployment that has been associated with previous recessions.

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