Officials raised the benchmark interest rate to a range between 1.5% and 1.75% to combat ongoing inflation, signifying the largest benchmark interest rate increase since 1994, according to CNBC.
More numbers: Federal Reserve officials also cut their outlook for 2022 GDP growth from 2.8% in March to 1.7%.
- Meanwhile, the inflation projection by personal consumption expenditures increased to 5.2% from 4.3%.
What the Fed is saying: “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” said Fed Chairman Jerome Powell.
- The July meeting of the Federal Open Market Committee might result in an increase of 50 or 75 basis points, he added.
Our take: NAM Chief Economist Chad Moutray gave us some background on the Fed’s intentions. “In the latest economic projections, the median forecast of [FOMC] participants for the federal funds rate is 3.4% by the end of 2022. This would suggest another 175 basis points of increases by year’s end.”
- “It also predicts that the federal funds rate would increase to 3.8% by the end of 2023.”
- “Beyond these moves, the Federal Reserve will also continue to reduce the size of its balance sheet, as outlined at its May 3–4 meeting. This will also put upward pressure on interest rates.”