This story has been updated with Powell's remarks. The Federal Reserve, fighting to tame inflation, is raising its key interest rate by three-quarters of a point—triple the usual amount, and the biggest hike since 1994. Fed Chairman Jerome Powell dismissed the idea of a rate hike this size last month, saying it was "not something the committee is actively considering," but data released since then shows that inflation has soared to a four-decade high, CNBC reports. At a news conference Wednesday, Powell said another three-quarter point rise is possible after the Fed meeting in late July, reports the AP.
The move announced Wednesday will increase the Fed's benchmark rate to a range between 1.5% and 1.75%, reports the Wall Street Journal. When asked why the Fed had moved more aggressively than expected, Powell said inflation had accelerated, along with public expectations that the central bank would get it under control. "We thought strong action was warranted at this meeting and we delivered that," he said. The Fed forecast a weakened economy over the next two years, with unemployment rising slightly and inflation gradually dropping, though it still expects the rate to be 5.2% by the end of this year.
"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures," the Fed's policy-setting commmittee said in a statement, per Reuters, adding that it remains committed to getting inflation back to 2%. When asked if a recession was a price worth paying to get inflation under control, Powell said, "We’re not trying to induce a recession now. Let’s be clear about that. We’re trying to achieve 2% inflation.”
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