Federal Reserve raises key interest rate by 0.75% in inflation fight
The Federal Reserve on Wednesday raised its key interest rate by 0.75% for the third time in a row as it races to get ahead of the galloping inflation that is
The Federal Reserve on Wednesday raised its key interest rate by 0.75% for the third time in a row as it races to get ahead of the galloping inflation that is sapping the earnings of American consumers.
In its latest economic forecast, the Federal Open Market Committee said it now projects that the U.S. unemployment rate will climb from 3.7% to 4.4% — meaning hundreds of thousands more Americans will be without jobs.
The stock market did not respond well after the interest rate news was announced, with the Dow Jones Industrial Average dropping 522 points, or 1.7%, at the close. The S&P and Nasdaq saw similar percentage drops.
This month, the Bureau of Labor Statistics reported inflation had climbed by 8.3% year on year and 0.1% month on month. Both figures came in higher than analysts expected, raising fears that inflation is becoming entrenched.
The essence of the problem is that demand in the economy is still too high amid a global supply crunch. Thanks to restrained spending during Covid lockdowns and federal stimulus plans, consumers found themselves flush with cash as the economy began to reopen. Meanwhile, Covid supply chain issues lingered, and Russia's invasion of Ukraine dampened access to both food and energy in other parts of the world.
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