This sharp interest rate hike should help curb high inflation. The US central bank system sees an inflation increase to 5% by the end of this year.
The interest rate step is also slightly larger than the Fed initially announced, each time it was satisfied with steps of 50 basis points. The markets were widely expected to take a firmer intervention, especially after it emerged last week that inflation is also rising faster than expected in the world’s largest economy.
The 75 basis point increase has moved the key interest rate target in the 1.5% to 1.75% range, a target the Federal Reserve has set.
Dollar stronger
In response, the dollar strengthened, the yield on a US 10-year Treasury bond fell to 3.4195%.
Market participants previously criticized the Federal Reserve for saying that such an interest rate hike would have come too late now that inflation has risen sharply and has remained high.
The high inflation is partly due to the increased fuel prices due to the war in Ukraine. Foods have also become more expensive, causing many American households to see their purchasing power decline.
Consumer economic confidence in the US, meanwhile, has fallen to an all-time low. Fighting inflation is his administration’s top domestic priority, according to President Joe Biden.