Fed Raises Interest Rates By 0.50%, Largest Move Since 2000

The Federal Reserve on Wednesday raised short-term interest rates by 0.50%, as part of an effort to tamp down the inflationary pressures weighing on Americans.

The central bank suggested that it will further raise borrowing costs throughout this year as it attempts to undo its pandemic-era, easy money policies. The policy-setting Federal Open Market Committee also detailed plans on unwinding its nearly $9 trillion balance sheet.

The decision to raise rates by 0.50% marked the most aggressive increase made in a single meeting since May 2000. Over the last two decades, the Fed has opted to raise interest rates only in increments of 0.25%, with the latest move underscoring the severity that inflation poses at the moment.

“The Committee is highly attentive to inflation risks,” the FOMC said in its updated policy statement.

The Fed is now targeting interest rates in a range between 0.75% and 1.00%, with some Fed officials advocating for raising the target closer to 2.5% by the end of the year.

Fed hikes bleed through the economy in the form of higher interest rates on credit products like credit cards, mortgages, and business loans. Since the Fed’s first post-COVID interest rate hike in mid-March, 30-year fixed mortgage rates have risen by a full percentage point, to over 5%.

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Source: CNBC