Fed Looks to Raise Interest Rates

Update: The Federal Reserve raised interest rates by 75 basis points today, increasing the benchmark fed-funds rate to a range of 1.5% – 1.75%. The increase is the largest since 1994, and additional rate hikes are expected to follow later this year to curb spiraling inflation.  

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The Federal Reserve concludes its two-day meeting this afternoon. At 2:00 Eastern time, the Fed will announce its decision to raise interest rates for the third time this year. Inflation has continued to rise, as the Bureau of Labor Statistics reported last week, hitting 8.6% over the past 12 months. 

As inflation has risen, the Federal Reserve Open Market Committee has taken two prior measures to curb the spike. It previously increased the Fed funds target rate to 0.25% to 0.5% in March, and 0.75% to 1% in May. Previously, Fed Chairman Jerome Powell had indicated today’s meeting would reveal an additional 50 basis point hike, but some analysts contend an increase of 75 basis points is more likely. That amount would be the largest increase since 1994.

According to CME Group’s FedWatch, there is over 95% probability that the Fed will opt for the larger increase. While such an increase in June, and what some analysts expect could be as high as 3.25%-3.5% by the end of the year, could trigger recession, the opportunity for a “soft landing” may have passed. 

“I think we’re sort of past the point where a ‘soft landing’ is plausible … I think they’re going to have to cause a contraction,” said Jefferies’ chief economist, Aneta Markowska.