The Federal Reserve raised its benchmark interest rate by half a percentage point, the biggest jump since 2000.
There were no surprises when the unanimous decision was announced after the central bank set its target federal funds rate to a range between 0.75% and 1%.
Fed Chair Jerome Powell said policymakers were ready to approve half-percentage-point rate hikes at upcoming meetings in June and July.
Powell explicitly ruled out raising rates by three-quarters of a percentage point. “A 75-basis-point increase is not something that the committee is actively considering,” Powell responded to reporters.
Powell called on Americans struggling with high inflation to be patient. He said “normal economic” people probably don’t have that much extra to spend.
“And it’s immediately hitting your spending on groceries… on gasoline on energy and things like that. So, we understand the pain involved,” he noted.
The central bank also outlined a program in which it eventually will reduce its bond holdings by $95 billion a month.
Powell said he and his Fed colleagues were determined to restore price stability, since the implications of inflation getting out of hand were worse. “In the end, everyone is better off … with stable prices,” he said.
Besides the highest inflation in 40 years the Fed is also facing great economic uncertainty from Russia’s war in Ukraine and China’s on-going lockdowns.