The Federal Reserve on Wednesday raised interest rates by an unusually steep 75 basis points, the biggest rate hike in 28 years, an aggressive move intended to dampen inflation that appears to have gotten out of the central bank’s control.
The move pushed up the federal funds rate target range to 1.5%-1.75% from 0.75%-1.0%.
There was one dissent from Kansas City Fed President Esther George, who favored a half-point increase.
Policymakers also saw interest rates rising substantially more than they had predicted in March, with the median forecast for the fed funds rate ending the year at 3.4%, up from 1.9% in March.
The decision was widely expected, but only after last-minute media stories led to generalized speculation that Fed officials were ditching earlier guidance about 50bp moves to act more forcefully.
The Fed "anticipates ongoing increases in the target range will be appropriate," the central bank said in a statement. "The Committee is strongly committed to returning inflation to its 2% objective."
A stronger-than-expected May CPI reading of 8.6%, in addition to rising inflation expectations in two closely watched consumer surveys, appear to have convinced policymakers they needed to act more swiftly.
The Fed boosted its projections of PCE inflation this year to 5.2% from 4.3%, and downgraded its forecasts for economic growth in 2022 to 1.7% from 2.8% in the March forecast.