The Fed announces a 75 basis point hike in interest rates to 1.75%

The United States Federal Reserve announced today, Wednesday, June 15, that raises its interest rates by 75 basis points compared to the expected 50 to reach 1.75%. The result differs from the market consensus, which expected an increase of 1% to 1.5%.

FOMC Statement

Global economic activity seems to have picked up after falling in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. The Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising energy prices and general price pressures.

Russia’s invasion of Ukraine is causing enormous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and weighing on global economic activity. Furthermore, the COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is very attentive to the risks of inflation.

The Committee tries to reach maximum employment and an inflation rate of 2% in the long term. In support of these goals, the Committee decided to raise the target range for the federal funds rate to the 1.5% – 1.75% range, and anticipates that continued increases in target range will be appropriate. In addition, the Committee will continue to reduce its holdings of Treasury and agency debt securities and agency mortgage-backed securities, as outlined in the Federal Reserve’s Balance Sheet Reduction Plans that were released in May. The Committee is firmly committed to bringing inflation back to its 2% target.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information on the economic outlook. The Committee will be prepared to adjust the monetary policy stance as appropriate if risks arise that may impede the achievement of its objectives. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting in favor of the monetary policy measure were Jerome H. Powell, Chairman; John C. Williams, Vice President; Michelle W. Bowman; Lael Brainard; James Bullard; Lisa D. Cook; Patrick Harker; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller. Voted against this action was Esther L. George, who preferred at this meeting to raise the target range of the federal funds rate by 50 basis points., up to 1.50%. Patrick Harker voted as an alternate member at this meeting.