On Wednesday, the Federal Reserve increased its key interest rate by a quarter of a percentage point (.25%) as policymakers made their first step in attempting to curb fast-growing inflation by increasing the costs of borrowing, according to a report.
Fed officials have held interest rates at or near zero since March 2020, the onslaught of the pandemic. This week’s announcement was the first rate increase since 2018.
The policymakers anticipate six similar-sized increases this year as inflation is at a 40-year high.
“The economy no longer needs—or wants—this very highly accommodative stance,” Jerome H. Powell, the Fed chair, said during his post-meeting news conference.
The central bank‘s move on fast price hikes will force it to find the balance while policymakers attempt to slow down the economy to tame the demand and allow prices to ease, but not so far as to plunge into recession.
Powell believes that “the probability of a recession within the next year is not particularly elevated”. He cites strong demand, a healthy labor market, and other conditions that are “signs” that the economy will be able to thrive “in the face of less accommodative monetary policy.”
Officials anticipate raising the rates up to 2.8% by the end of 2023, based on a median estimate, an increase from 1.6% in their previous projections.
This story originally appeared on The New York Times.
Did you hear about the Federal Reserve increasing interest rates? It’s all about tackling rising inflation. Remember, we might see more hikes this year, so keep an eye on your financial game plan!