The US Federal Reserve intensified its fight against high inflation on Wednesday, raising its key interest rate by three-quarters of a point – the largest bump since 1994 – and signaling more rate hikes ahead as it tries to cool off the US economy without causing a recession.
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The unusually large rate hike came after data released Friday showed US inflation rose last month to a four-decade high of 8.6% – a surprise jump that made financial markets uneasy about how the Fed would respond. The Fed's benchmark short-term rate, which affects many consumer and business loans, will now be pegged to a range of 1.5% to 1.75% – and Fed policymakers forecast a doubling of that range by year's end.
"We thought strong action was warranted at this meeting, and we delivered that," Fed Chair Jerome Powell said at a news conference in which he stressed the central bank's commitment to do what it takes to bring inflation down to the Fed's target rate of 2%. Getting to that point, he said, might result in a slightly higher unemployment rate as economic growth slows.
The central bank revised its policy statement to acknowledge that its efforts to quell inflation won't be painless, removing previous language that had said Fed officials expect "the labor market to remain strong."
