JUNE 20, 2022 – FED UPS RATES BY 0.75 PERCENT WITH A SIMILAR RISE POSSIBLE IN JULY
The Federal Reserve instituted the largest rate hike since 1994 when it called for a 0.75 percent increase on Wednesday. This raises the federal funds rate from 0.75%-1% to 1.5%-1.75%. This latest increase has followed 0.5% increases in March and May of this year. The aggressive move is an attempt to slow down inflation which is running at a 40 year high of 8.6 percent. It is a signal the Fed is determined to push inflation down to its 2 percent target, while tolerating a rise in the unemployment rate.
Fed Chair Jerome Powell said he doesn’t expect raises of this kind to be common, but it is likely we are in for another 0.5% to a 0.75% increase at the Fed’s next meeting in July. Powell said, “We aren’t going to declare victory until we really see convincing evidence that inflation is coming down.”
The Fed expects to raise rates four more times this year, with the benchmark rate expected to end the year between 3.25% and 3.5%. This would be the highest it’s been since 2008. There is still time to get an interest rate hedge in place before the subsequent rate hikes, and lock in the lower rates available now.