In a move designed to address a rapid increase in inflation, the Federal Reserve has announced that it is raising interest rates by 0.75%.
That is the largest hike in rates since 1994, when President Bill Clinton was still in his first term.
In a press conference, Fed Chairman Jerome Powell remarked that “inflation is much too high, and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down.”
The Chairman continued: “Inflation remains well above our longer-run goal of 2%. Over the 12 months ending in March, total Personal Consumption Expenditures prices rose 6.6%; excluding the volatile food and energy categories.”
Powell added: “Aggregate demand is strong, and bottlenecks and supply constraints are limiting how quickly production can respond. Disruptions to supply have been larger, and longer lasting than anticipated, and price pressures have spread to a broader range of goods and services.”
Wall Street responded positively to Powell’s announcement, jumping around 303 points, after nearly a week of dormant activity.
“Anchoring expectations has been a core part of the central bank’s approach over the last decade,” noted the Wall Street Journal in a report on the Fed action, adding that “volatile conditions are demanding flexibility.”
Said the Financial Times: “The decision marks an abrupt pivot from the Fed’s previously telegraphed plans for a second consecutive 0.50 percentage point rate rise.”
In his conference with reporters, Powell hinted that additional rate hikes may be in the making. “We will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%. We anticipate that ongoing rate increases will be appropriate.”
By Garry Boulard
