Federal Reserve officials raised the main fed funds interest rate by three-quarters of a percentage point, the largest increase since 1994. The Federal Open Market Committee (FOMC) vote, which included new Governor Lisa Cook and Philip Jefferson saw only one dissent, that of Kansas City Fed Chairman Esther George, who preferred a half-point raise.
The FOMC has increased its benchmark rate to a range of 1.5% to 1.25% from 0.25% to the previous 0.5%. The Fed statement signaled that rates will continue to rise aggressively between now and the end of the year to curb rampant inflation.
The Fed’s median estimates now point to rates at 3.4% by the end of the year, implying a further tightening of 175 basis points this year. A peak of 3.8% is expected in 2023 and five officials predict a rate of more than 4%; the median projection for March was 1.9% this year and 2.8% next.
The new economic estimates see US GDP rise by 1.7% in 2022 and 2023. Growth that will rise only slightly to 1.9% in 2024. Unemployment is instead seen to rise from 3.7% in 2022 to 3 , 9% next year and 4.1% in 2024.
The Fed reiterated that it will cut its balance sheet by $ 47.5 billion per month – a move that took effect on June 1 – rising to $ 95 billion in September.