The Federal Reserve on Wednesday raised its benchmark interest rates by 75 basis point, the most since 1994, in an attempt to bring down surging inflation. The policy rate is now at a range of 1.5%-1.75%.
“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Fed’s Chair Jerome Powell said.
“I think events of the last few months have raised the degree of difficulty, created great challenges,” he said. “And there’s a much bigger chance now that it will depend on factors that we don’t control.”
The chairman also added that it is still possible for the central bank to achieve a soft landing, meaning that the Fed will be able to bring down inflation without causing a recession.
Lastly, he noted that although he sees a 50-70 basis point increase in the meeting in July, decisions will be made meeting by meeting.
According to the dot plot of individual members’ expectations on the Fed funds rate, the U.S. central bank’s benchmark rate will finish 2022 at 3.4%, an upward revision of 1.5 percentage points from the March estimate.
The Fed also significantly cut its outlook for 2022 economic growth to 1.7%, down from 2.8% from the March outlook.
The inflation projection pointed to rise to 5.2% this year, up from 4.3%. Meanwhile, core inflation, which excludes food and energy, indicated at 4.3%, up by just 0.2 percentage point from the previous projection.
Stocks in Wall Street closed higher on Wednesday as Dow Jones snapped its five-day losing streak by gaining 303.70 points or 1% to close at 30,668.53 points. The S & P 500 rose 1.46% to 3,789.99 and the Nasdaq increased 2.5% to close at 11,099.15.