The Federal Reserve Hikes Up Interest Rates 

consumer prices increase in the US

The Federal Reserve announced its largest interest rate hike in nearly 30 years. The Fed escalated its battle against inflation with the largest interest rate hike in 28 years, as the central bank struggles to regain control over soaring consumer prices.

The benchmark interest was raised by three-quarters of a percentage point, which makes it the biggest hike up since 1994. It comes following a quarter-point hike in March, as well as another half-point increase a few weeks ago in May. 

A few days ago, most financial forecasters were expecting the increase to be another half-point. 

But the policymakers opted for a more aggressive move, following a report that was released on Friday, which showed that inflation was even stronger than expected last month in May. 

Fed Chair Jerome Powell said, “strong action was warranted.” 

The move is meant to slow inflation down from over 8 percent to closer to the goal of about 2 percent. 

The central bank’s responsibilities include two main things: Keeping prices at bay and keeping unemployment low. 

But prices on everything from food to clothing could remain high by the end of the year. Consumer prices are up 8.6 percent compared to a year ago. The increase reflects not only rising costs for gasoline and groceries, but also for rent and airfares and a wide range of services. 

Experts say that the bottom line is that it seems like inflation is becoming more entrenched. 

The job market could also take a big hit, with reports of hiring freezes across the country. The housing market could also take a big hit. 

 All of this is making economists fear that a recession is indeed upon the United States. 

Fed officials on have projected that the economy will only grow just 1.7 percent this year, which is a big hit down from the 2.8 percent growth rate they were predicting three months ago.

Growth is likely to slow even further in 2023, slimming the chance of a so-called “soft landing,” in which inflation falls without a recession.

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