VIDEO: Fed Hikes Interest Rates to Highest Level in 20 Years

Updated 25.3.2024 18:43

The Fed raised its target range for its benchmark interest rate by 0.25% while leaving the door open for additional rate hikes in the coming months.

Following its pause in June, the Federal Reserve resumed its aggressive rate hike campaign today as its inflation battle wages on. The Fed announced today an increase in interest rates of 0.25%, bringing the central bank’s federal funds target rate range to 5.25% – 5.5%.

Today’s rate hike brings interest rates to their highest level since 2001 and marks the 11th hike since March 2022.

The decision this month by the FOMC committee was unanimous. The FOMC also left the door open for additional rate hikes in the coming months.

In a statement, the FOMC commented on today’s hike, stating:

“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

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The most recent inflation data, released earlier this month, showed that core inflation increased by 4.8% compared to June 2022. Headline inflation, which includes gas and food, increased by 3% in June, marking its slowest yearly increase since March 2021 and coming in well below last year’s peak of 9%.

In its statement today, the FOMC added:

“Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.”

Last month, the Fed signalled it would likely raise rates twice in the second half of 2023.

Following today’s rate hike, this would leave one potential hike in 2023, provided future data shows inflation cooling, similar to the June report.

With the Fed’s inflation target still at 2%, the central bank projects inflation to end 2023 at around 4%.

Featured Video Source: CNBC Television YouTube

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