The U.S. Federal Reserve announced Wednesday it would raise interest rates by the largest amount in nearly 30 years in an effort to cool inflation without tipping the economy into a recession.
The central bank said it would raise its key interest rate by three-quarters of a percentage point, the largest amount since November 1994, and signaled more hikes to come.
The rate increase comes as inflation, which measures the price of common goods such as food and fuel, rose by 8.6% over the 12 months ending in May — the highest rate in 40 years — driven by high post-pandemic demand for homes, cars, travel and other goods and services, global supply chain problems, strict COVID-19 lockdowns in China, and Russia’s invasion of Ukraine.
In a statement announcing the rate hike, the Federal Open Market Committee, the Federal Reserve’s policy-setting board, said it remains “strongly committed to returning inflation to its 2% objective.”
The three-quarter-point rate increase exceeds the one-half-point rate increase that Federal Reserve Chairman Jerome Powell had previously suggested would be imposed.
He told reporters Wednesday that the latest information showed higher inflation than expected.
“We thought strong action was warranted at this meeting,” he said, “and we delivered that.”
Shortly after the Fed’s announcement, Powell said if inflation shows no sign of abating, the central bank would likely impose either a half- or three-quarter-point increase at its next meeting in July.
Some information for this report came from The Associated Press, Reuters and Agence France-Presse.