Fed Raises Rates by 75 Basis Points to Clamp Down on Inflation

Federal Reserve officials raised interest rates by 75 basis points for the second straight month, delivering the most aggressive tightening in more than a generation to curb surging inflation — but risking a sharp blow to the economy.

Fed announced

Policy makers, facing the hottest cost pressures in 40 years, lifted the target for the federal funds rate on Wednesday to a range of 2.25% to 2.5%. That takes the cumulative June-July increase to 150 basis points — the steepest since the price-fighting era of Paul Volcker in the early 1980s.

The Fed announced that it had lifted the policy rate, federal funds rate, by 75 bps to the range of 2.25-2.5%. This decision came in line with the market expectation. In its policy statement, the Fed noted that it anticipates that ongoing increases in the policy rate will be appropriate.

Key Reports

“Fixed investment looks to have declined in Q2.”

“Labor market is extremely tight.”

“Wage growth is elevated.”

“Job growth is slower, but still robust.”

“Labor demand is very strong, supply remains subdued.”

“Inflation well above the goal.”

“Overall labor market suggests underlying aggregate demand remains solid.”

“Price pressures are broad.”

“Although prices for some commodities have eased, there is still additional upward pressure on inflation.”

“Acutely aware of significant hardship of high inflation.”

“We are highly attentive to risks of inflation.”

75 bps was right call in light of the data.”

“But we wouldn’t hesitate to make a larger move if appropriate.”

“Very broad support for move at this meeting.”

“Inflation has continued to disappoint.”

“We’ve moved expeditiously to get to neutral.”

“Our focus is going to continue to be on getting supply and demand in better balance.”

“We will be looking at incoming data, including are we seeing a slowdown in economic activity we think we need.”

“Some evidence we are seeing that now.”

“We will be looking closely at inflation.”

“Our mandate is for headline inflation, but we look at core as a better read.”

“Will be asking if stance of policy is sufficiently restrictive to bring inflation back down to target.”

“Likely full effect of rate increases has not been felt yet.”

“Committee broadly feels we need to get to a moderately restrictive level.”

“For September, will make decision based on data.”

“Time to go to a meeting by meeting basis, not provide clear guide as before.”

About Jerome Powell (via Federalreserve.gov)

“Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028.”

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