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US Fed raises interest rates by 75 basis points, biggest hike in 28 years

EconomyUS Fed raises interest rates by 75 basis points, biggest hike in 28 years

Washington (The Times Groupe)- The US Federal Reserve raised its benchmark interest rate by 75 basis points on Wednesday, marking its largest rate hike in 28 years.

According to a statement from the Federal Open Market Committee (FOMC), the target range for the federal funds rate has been raised to 1.5%-1.75%.

All FOMC members supported the largest rate hike since 1994, except Kansas City Fed President Esther George, who voted for a 50 basis points hike.

According to the FOMC, “ongoing increases in the target range will be appropriate.”

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” it said.

“The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” it added.

The FOMC said it is committed to returning inflation to its 2% target.

Consumer inflation in the US rose to 8.6% in May, the highest level in more than 40 years.

Fed Chair Jerome Powell later said the central bank understands the hardship caused by inflation, adding: “We are strongly committed to bring inflation down and moving expeditiously to do so.”

“The labor market is extremely tight and inflation is much too high,” he told at a post-meeting press conference. “The tightening conditions seen in recent months should continue to tamper growth, and help bring demand into better balance with supply.”

Powell said incoming macroeconomic data and the economic outlook would determine the pace of rate hikes.

“Clearly, today’s 75 basis points of increase is an unusually large one, and I do not expect moves of this size to be common. From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting.”

Powell emphasized that the FOMC will make its interest rate decisions meeting by meeting.

“Economy often evolves in unexpected ways. Inflation is obviously surprised to the upside over the past year, and further surprises could be in store. We need to be nimble … We are highly attentive to inflation risks and determined to take the measures necessary to restore price stability,” he explained.

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