Fed increases interest rates by 75 basis points to combat inflation

28 Jul 2022 , 09:26 AM

For the second consecutive month, Federal Reserve increased interest rates by 75 basis points.

Faced with the strongest price pressures in 40 years, policymakers increased the federal funds rate range between 2.25% and 2.5%. This brings the total increase from June to July to 150 basis points, which is the highest increase since Paul Volcker's price-fighting years in the early 1980s.

In a statement issued in Washington, the Federal Open Market Committee reiterated its previous assertion that it is "very sensitive to inflation risks" and stated that it "is fully committed to returning inflation to its 2% objective." The FOMC reaffirmed that it "anticipates that further rises in the target range will be appropriate" and that it would change its policies if dangers arose that might prevent it from achieving its objectives.

US markets continued to rise following the judgment. The dollar decreased while short-term Treasury yields increased.

The US economy is already being impacted by higher rates. Sales have slowed in the property sector, where the consequences are especially noticeable.

Although Fed representatives insist that they can manage a so-called "soft landing" for the economy and prevent a sharp downturn, some analysts claim it will take a recession with rising unemployment to considerably slow price increases.

Investors are now waiting to see if the Fed stops the rate hikes at its upcoming meeting in September or if the central bank is under pressure from significant price increases to keep making huge boosts.

Central banks from all around thmise world are fighting to stop rising prices. The Bank of Canada raised interest rates by a full percentage point earlier this month, and the European Central Bank shocked markets with its first rate increase in more than ten years.