BREAKING NEWS: The US Federal Reserve (Fed) realized the highest interest rate hike in 28 years. The Fed raised the policy rate by 75 basis points to 1.50-1.75 percent.
Breaking news! The US Federal Reserve (Fed) raised its policy rate by 75 basis points to 1.50-1.75 percent.
Thus, the Fed realized the sharpest interest rate hike since 1994.
In the text of the decision, the Fed emphasized that it has a strong commitment to return to the 2 percent inflation target.
THE DECISION WAS TAKEN WITH 10 VOTES AGAINST 1
In a statement released by the Fed, it was stated that the decision to raise the interest rate was taken with 10 votes against 1, and Kansas City Fed President Esther George voted for a 50 basis point increase.
Emphasizing that the Federal Open Market Committee (FOMC) aims to achieve maximum employment and 2 percent inflation in the long term, it was reported that it was decided to raise the federal funds rate to a range of 1.50-1.75 percent to support these goals and that ongoing increases are expected to be appropriate.
The 75 basis point increase decided by the bank at the June meeting was the fastest single rate hike since 1994.
ACCELERATING INFLATION INCREASED THE PRESSURE ON THE FED
The Fed’s monetary policy tone began to change in the last quarter of 2021, with high inflation pressure coming with the rapid economic recovery following the novel coronavirus (Covid-19) outbreak in the US.
The Fed, which started to reduce the pace of asset purchases at its November meeting last year, completed the asset purchase operation in March and started interest rate hikes. While the bank decided to raise interest rates for the first time since 2018 with an increase of 25 basis points at the March meeting, it realized the fastest rate hike since 2000 with 50 basis points at the May meeting.
The Fed started shrinking the balance sheet, another step in post-pandemic policy normalization, in June.
Inflation, which continued its upward trend due to the Russian-Ukrainian War and policies to contain the Covid-19 outbreak triggered by the Omicron variant in China, increasing the problems in the supply chain, further increased the pressure on the Fed.
Inflation in the US reached 8.6 percent annually in May, the highest level since December 1981.