Fed increases interest rates by another 75 basis points, forecasting additional rate increases

September 22, 2022

In an effort to help cool the country’s stubbornly high inflation, the Federal Reserve increased interest rates by another three-fourths of a percentage point on Wednesday, pushing borrowing costs to their highest level since the Great Recession—even as experts worry the hawkish tightening could send the economy into a recession.

The Federal Open Markets Committee announced on Wednesday that it would increase the federal funds rate (the rate at which commercial banks borrow and lend reserves) by 75 basis points for the third consecutive meeting, bringing it to a target rate of 3% to 3.25%—the highest level since 2008.

After the most recent increase in interest rates in July, Fed Chair Jerome Powell argued for a slower pace of tightening. However, after the Labor Department reported that consumer prices rose sharply more than anticipated in August, Fed officials changed their stance, indicating that the central bank still has work to do before it can control inflation.

Stocks fell immediately after the announcement, with the Dow Jones Industrial Average reversing gains to trade down 100 points. Officials also stated that they project the federal funds rate will be at roughly 4.4% by the end of the year, indicating they will raise rates by at least 50 basis points for the next two meetings.

Source: Forbes
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