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5 May 2022

Fed Implements Largest Interest Rate Hike in over Two Decades amid Soaring Inflation

The Index Today

On Wednesday, the U.S. Federal Reserve imposed a half percentage point interest rate hike for the first time in more than 20 years in a bid to control red hot inflation.

As per Investing.com, the Federal Open Market Committee (FOMC) hiked its interest rate to an extent from 0.75% to 1% from 0.25% to 0.5% earlier. This comes after Fed Chair Jerome Powell indicated a 50 basis point interest rate increase the previous month.

In a statement, the U.S. central bank said, "In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that ongoing increases in the target range will be appropriate." 

In addition to the interest rate increase, the Fed also intends to minimize its near-$9 trillion balance sheet, in an attempt to curb the fiscal outlook that would stall economic growth.

However, Aptus Capital Advisors’ David Wagner said to Investing.com, “[W]e're going to see longer-lasting and higher than expected inflation for quite some time because of the China problem, it's not going away in the near term.”

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