The Federal Reserve raised the benchmark interest rate by half a percentage point on Wednesday, it's most aggressive hike since 2000. The Fed also hinted to further rate hikes in the future as it tries to tame the worst inflation in 40 years.
"With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2% objective and the labor market to remain strong," the Fed said in a statement. "In support of these goals, the Committee decided to raise the target range for the federal funds rate to .75 to 1% and anticipates that ongoing increases in the target range will be appropriate."
This comes as U.S. GDP starts to slow. The U.S. economy contracted in the first quarter of 2021, the first time since the pandemic started in the spring of 2020, according to the Bureau of Economic Analysis. Experts projected gross domestic product (GDP) to grow by 1% in Q1, however it declined by 1.4% instead.
"The key factors in the GDP decline were trade and inventories, whereas consumer spending and business investment remained strong—suggesting that the recovery from the pandemic remained solid," reads a Yahoo! Finance article.
For some, the slip in GDP is further evidence of a recession on the horizon. "The report isn't as worrisome as it looks," Lydia Boussour, lead U.S. economist at Oxford Economics told the Associated Press. "The details point to an economy with solid underlying strength that demonstrated resilience in the face of Omicron, lingering supply constraints and high inflation."