The Federal Reserve announced Wednesday it might increase interest rates inside a series of hikes throughout 2022 amid an overheating economy and soaring inflation.
The Federal Open Market Committee (FOMC) announced it might increase federal-funds rates by a quarter percentage point to a variety between 0.25% and 0.5% from its near-zero level.
The Fed, led by Chairman Jerome Powell, highlighted growing concerns regarding inflation after the FOMC meeting Wednesday, adding the war in Ukraine could further worsen pricing pressure.
\”Inflation remains elevated, reflecting supply and demand imbalances towards the pandemic, higher energy prices, and broader price pressure,\” the FOMC said in a press release.
\”The invasion of Ukraine by Russia causes tremendous human and economic hardship,\” it added. \”The implications for that U.S. economy are highly uncertain, but in the near term, the invasion and related events will probably create additional upward pressure on inflation and weigh on business activities.\”
The committee's last rate hike was at December 2022, CNBC reported.
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The FOMC voted eight to one in support of the rate hikes, with St. Louis Fed President James Bullard dissenting in support of a bigger, half-point percentage increase. Wednesday's statement also established that the Fed might construct a plan to reduce its $9 trillion asset portfolio.
The fed-funds rate sets the borrowing cost put on consumers and businesses throughout the market, The Wall Street Journal reported. Such borrowing could include rates on mortgages, charge cards, savings accounts, auto loans and company debt.
The proceed to hike rates usually depresses consumers' ability to spend some money, while slashing rates promotes spending and borrowing, based on the WSJ.