After the Fed's rate decision, the dollar extended its gains

16 Jun 2022 , 08:59 AM

The dollar gained ground on Wednesday (15-06-2022) as the Federal Reserve hiked its target interest rate by three-quarters of a percentage point to combat a disruptive inflation spike.

The US Dollar Currency Index was up 0.35 percent at 105.66, tracking the greenback versus six major currencies. The US Federal Reserve raised benchmark lending rates by three-quarters of a percentage point, or 75 basis points, on June 15, in what is considered a bid to rein in spiraling inflation.

While announcing the rate hike, the US central bank stated that it is “strongly committed” to bringing inflation back to 2%. It predicted a weakening of the economy in the months ahead and a rise in the jobless rate.

The Fed’s 75 basis point rate boost is the largest since 1994 and comes after recent statistics indicated little headway in the country’s inflation fight.

The Fed’s tighter monetary policy was followed by a downgrade to the economy’s prognosis, with growth expected to drop to a below-trend 1.7 percent this year, unemployment rising to 3.7 percent by the end of the year, and climbing to 4.1 percent by 2024.

While no one predicted a full-fledged recession in 2023, the range of economic growth estimates dipped below zero, and the federal funds rate was expected to decline in 2024.