The Federal Reserve on Wednesday hiked benchmark interest rates by an additional three-quarters of a percentage point and said it would keep raising interests above the current level.
As the Fed continues its war on inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
The hikes that started in March and from the point of near-zero mark the most aggressive Fed tightening since it started using the overnight funds’ rate as its principal policy tool in 1990.
In addition to the massive rate increases, Fed officials pointed out that they’ll continue hiking until the funds level hits a “terminal rate,” or end point of 4.6% in 2023.
The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024; Fed Chairman Jerome Powell and his colleagues have emphasized in recent weeks the unlikelihood that rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences. The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing.