The Federal Reserve said on Wednesday that it would raise interest rates for the first time in three years as policymakers look to cool red-hot inflation.
The widely anticipated move – that the Fed would raise rates by 25-basis points – brings to an end the ultra-easy monetary policy put in place two years ago to prop up the economy through the COVID-19 pandemic.
The rate liftoff, which puts the benchmark federal funds rate at a range between 0.25% and 0.5%, is likely just the start of a series of increases intended to curb runaway inflation.
New economic projections released after the meeting show that policymakers expected six more, similarly sized increases over the course of 2022 after consumer prices hit a 40-year-high. It marks a considerable shift from just six months ago, when half of the central bankers believed interest rate increases were not warranted until at least 2023. Fed officials also expect inflation to remain elevated, ending 2022 at 4.3% – far above the Fed’s annual target of 2.3%.