Fed raises key rate by a half-point in bid to tame inflation

|

May 4th, 2022

Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing, March 3, 2022 on Capitol Hill in Washington. The Federal Reserve is poised this week to begin unleashing its most drastic steps in three decades to attack inflation by making it costlier to borrow — for a car, a home, a business deal, a credit card purchase — all of which will compound Americans' financial strains and likely weaken the economy. (Tom Williams, Pool via AP)

The Federal Reserve intensified its fight against the worst inflation in 40 years by raising its benchmark interest rate by a half-percentage point Wednesday — its most aggressive move since 2000 — and signaling further large rate hikes to come.

The increase in the Fed’s key short-term rate raised it to a range of 0.75% to 1%, the highest point since the pandemic struck two years ago.

The Fed also announced that it will start reducing its huge $9 trillion balance sheet, made up mainly of Treasury and mortgage bonds. Reducing those holdings will have the effect of further raising loan costs throughout the economy.

Related

Top Stories