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5 May 2022

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

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.”