The Federal Reserve on Wednesday increased its baseline interest rate range, launching the first in what will likely be a series of rate hikes meant to fight inflation.
The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for setting monetary policy, increased the federal funds rate by 0.25 percentage points to a range of 0.25 to 0.5 percent. The federal funds rate is the benchmark interest rate banks charge on loans to each other and is used to set borrowing costs on credit cards, automobile loans and mortgages.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” the FOMC said in a statement.
“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”
Eight of the FOMC’s nine voting members supported the decision to hike rates. The sole dissenter was James Bullard, president of Federal Reserve of St. Louis, who preferred a 0.5 percentage point hike.
The FOMC also projected roughly six more rate hikes this year, along with slower growth and higher inflation.
The panel’s median estimate of the year-end unemployment rate held at 3.5 percent, in line with their December projections and equal to February 2020 jobless rate. But the FOMC’s median estimate of gross domestic product (GDP) growth fell from 4 percent to 2.8, while the year-end annual inflation rate they projected rose from 2.6 percent to 4.3 as measured by the personal consumption expenditures price index.
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Federal Reserve announces interest rate hikes to combat record inflation https://t.co/QYUTWhonPx pic.twitter.com/a6MhNaAHEH
— The Hill (@thehill) March 16, 2022
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