U.S. Federal Reserve Raises Rates By 50 Basis Points, Highest in 22 Years

The U.S. Federal Reserve (Fed) has raised interest rates by 50 basis points in its largest hike since 2000. The effort is to double down on its expectation to combat inflation.

The U.S. central bank’s Federal Open Markets Committee (FOMC) said in a Wednesday statement that the decision was made to support its goals of achieving maximum employment and curbing inflation rates to 2% over the longer run.

The Federal Open Market Committee – the monetary policymaking body of the Federal Reserve – voted to raise interest rates by 50 basis points (0.5%) unanimously. This marks the first time the Fed has raised interest rates in back-to-back meetings since 2006.

Fed Chair Jerome Powell, in the FOMC’s first in-person question and answer session in years, emphasized how harmful high inflation has been to Americans, though he noted that the Fed has the necessary tools to control it and bring it down.

Powell pointed out that over 0.5% rate hikes were on the table for the Committee at each of the next few meetings, citing the Fed’s core mandates of maintaining price stability and maximum employment, both of which were being harmed by high inflation. Nevertheless, when asked if rate increases higher than 0.5% at a time were being considered, he said no.

Since the Fed’s 25-basis point rate hike last March, which was its first rate hike since 2018, Fed chair Jerome Powell has seemed to indicate he and his colleagues’ move towards increased hawkishness. In a recent public appearance, Powell noted that it would be difficult to tame inflation through rate hikes without risking recession, but today he expressed greater optimism. As he has consistently done for months, Powell argued the economy and labor market are strong enough to weather further increases in the federal funds rate.

The crypto markets responded positively both leading up to and following the conclusion of the FOMC meeting. Bitcoin and Ethereum are up 5 and 6% on the day at the time of writing, and both were up by about 3% going into the meeting.