In face of the highest inflation in 40 years, the Federal Reserve announced another widely expected rate hike last Wednesday. The Federal Open Market Committee (FOMC) unanimously decided to raise the target range for the federal funds rate to 0.75 to 1 percent, with further rate hikes “anticipated”. The 50 basis point hike follows a more cautious 25 basis point increase in March and marks the largest upward step since May 2000.
“Inflation is much too high and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down,” Fed Chairman Jerome Powell said in a press conference following the FOMC meeting. Even if inflation was starting to come down, Powell later hinted, the Fed wouldn’t stop the rate hikes, but likely go back to 25 basis point increases. As it stands, however, he expects “50 basis point increases on the table the next two meetings.”
That would be in line with projections made by FOMC members at their last meeting in March, which hinted at further rate hikes in 2022 and beyond. Back then the median projection for the target range of the federal funds rate at the end of 2022 was 1.75 to 2.00 percent, with further increases towards 3 percent anticipated for 2023.
This chart shows the U.S. federal funds target rate since 2007.
