Take that .5, .75 it is…
he Federal Reserve on Wednesday hiked interest rates by three quarters of a percentage point, its most aggressive move yet to try to control inflation, as it squeezes the U.S. economy.
For weeks, Fed leaders set expectations for an increase of half a percentage point, as it did in May, in the latest of seven rate increases slated for this year. But a surprisingly bleak inflation report released last week, the war in Ukraine plus growing signs that the markets and American public have lost faith in the Fed, ignited a more forceful push from central bank policymakers as they wrapped up two days of meetings. The Fed has not enacted a hike of this size since 1994, but signaled similarly-large hikes are coming later this year.
The move to hike interest rates will make the price of mortgages, auto loans and a wide array of business investments more expensive. Rising interest rates work to cool off an overheated economy by dampening consumer spending, so that demand for goods and services falls, helping bring prices down. However, investors and some businesses are newly concerned that the move to get inflation under control could cool the economy too much, triggering a new recession and a wave of layoffs.
Meanwhile, the markets fell this week as investors worried that the Fed was up to the task of slashing inflation. On Monday, the S&P 500 tumbled nearly 4 percent to cross into a bear market — meaning the index has lost 20 percent of its value since its most recent peak. So far in 2022, losses have wiped out a hefty chunk of the stock market’s pandemic-era gains.
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