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Fed Enacts Second 75-bp Increase in Federal Funds Rate
The Federal Reserve on Wednesday enacted its second consecutive increase of 0.75 percentage points in the federal funds rate as it seeks to rein in runaway inflation without creating a recession. CNBC reported that the back-to-back 75-basis-point increases, which bring the rate up to a range of 2.25%-2.5%, represent the most stringent consecutive moves since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s.
Although the federal funds rate most directly impacts what banks charge each other for short-term loans, it affects a multitude of consumer products such as adjustable mortgages, auto loans and credit cards. The increase takes the funds rate to its highest level since December 2018.
Markets largely expected the move, CNBC reported. In its post-meeting statement, the Federal Open Market Committee cautioned that “recent indicators of spending and production have softened.” FOMC officials again described inflation as “elevated” and cited supply chain issues and higher prices for food and energy along with “broader price pressures.“
- ◦Financing
- ◦Policy/Gov't
