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Fed Increases Rates By Another Three-Quarters of a Percentage Point, Announces More Hikes to Fight Inflation

Katie Lin

Summary: The Federal Reserve increased interest rates by another three-quarters of a percentage point on Wednesday in an effort to bring down inflation. According to reports by CNBC, the Fed has brought up its federal funds rate to a range of 3%-3.25%, the highest it’s been since 2008. The hikes come with the hope that inflation ...

The Federal Reserve increased interest rates by another three-quarters of a percentage point on Wednesday in an effort to bring down inflation.

According to reports by CNBC, the Fed has brought up its federal funds rate to a range of 3%-3.25%, the highest it’s been since 2008.

The hikes come with the hope that inflation will drop to 5.4% this year, from 6.3% in July.

The Fed plans to continue its hike until the funds level reaches 4.6% in 2023.

As for the remaining year, rates are expected to increase by at least 1.25%.

The increases — which had begun in March from a near-zero level — have been the most aggressive Fed tightening since 1990.

Federal Open Market Committee expects negative consequences from the rate hikes.

The funds rate affects debt instruments, such as home equity loans, credit cards, and auto financing. 

Unemployment is expected to rise to 4.4% by next year, and GDP is expected to drastically drop.

A recession is likely if the Fed continues its tightening.

Along with rate increases, the Fed has been reducing the amount of its bond holdings, pacing $95 billion a month from maturing bonds.

Author: Katie Lin

 

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