Federal Reserve raises interest rates by 0.75%

The Federal Reserve during its meeting yesterday raised interest rates by 0.75%, or 75 basis points.

Yesterday’s rate hike will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%. It is the largest rate increase since 1994 and comes in tandem with the highest inflation levels the United States has seen in over 40 years. Last month, inflation as measured by the consumer price index rose year-over-year by 8.6%, and consumers have felt price pressures from a variety of goods from food to gas prices.

A statement the Fed released yesterday reads that “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressure.” It also shows that the rate increase was approved by all Federal Open Market Committee members except for Kansas City Fed President Esther George, who “​​preferred at this meeting to raise the target range for the federal funds rate by 0.5 percentage point.”

In an announcement, Federal Reserve chair Jerome Powell signaled that the central bank will continue to raise rates by similar magnitudes throughout the end of the year, saying that “either a 50 basis point or a 75 basis point increase seems most likely” at its next meeting in July.