United States Federal Reserve's Federal Open Market Committee (FOMC) announced on Wednesday that it will increase the target range for the federal funds rate to between 1.5% and 1.75%. The 0.75 percentage point rate hike is Fed's biggest in 28 years.
"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures," as well as the Ukraine crisis and the lockdowns in China, which "are likely to exacerbate supply chain disruptions," the Fed said in its monetary policy statement. The central bank reaffirmed its commitment to reducing its balance sheet and "to returning inflation to its 2 percent objective."
The Fed's new economic projections show that its main interest rate will be at 3.4% at the end of the year, up 1.5 percentage points compared to the March estimate. The 2022 GDP projection has been revised down by 1.1 percentage points to 1.7%, while the unemployment rate estimate has been increased by 0.2 percentage points to 3.7%. PCE inflation estimate for 2022 is now 5.2%, up 0.9 percentage points from the previous projection and core PCE inflation is expected to hit 4.3%, compared to 4.1% from March.
