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Federal Reserve Hikes Interest Rates Again … This Time by 0.75%

The Federal Reserve raised interest rates by 75 basis points today, the biggest rate hike since 1994. The Fed also hinted to more rate hikes in the future as it intensifies the fight against rising prices.

This is the third time the central bank has raised interest rates this year, and experts have mixed feelings. Some are worried the aggressive approach will undercut economic growth, while others feel the Fed did not act soon enough. "Chairman Jerome Powell and his colleagues are walking a monetary policy tightrope hoping to avoid a recession while dampening demand," Mark Hamrick, senior economic analyst at Bankrate, told NBC News.

Hotter-than-expected inflation likely prompted the Fed to act more aggressively than anticipated. Inflation hit a year-over-year pace of 8.6% in May, according to the Consumer Price Index. "The uptick erased any hope that March represented peak inflation and hinted that solving the price-growth problem could be harder than previously expected," reads an article from Markets Insider. "By supporting another larger-than-usual rate hike, the committee is betting the economy is strong enough to continue recovering without support from the low rates the Fed adopted in the early months of the pandemic."

The next policy meeting ends on July 27, and Goldman Sachs says it now expects the Fed to raise rates by another 75 basis points in July, per Forbes. Rates now sit between 1.50% and 1.75%, matching the range just before the pandemic crash in early 2020.

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Wednesday, 29 June 2022