Well, the Fed really did it. It raised rates by 0.25%, or 25 basis points, and in doing so raised the benchmark interest rate target to a range of 0.25% to 0.50%. That’s the first time it’s done so since 2018.
The reason for the rate hike is inflation. As the Fed Open Market Committee said, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”
Further, as Breitbart reports, the Fed has high inflation projections for the rest of the year and sees itself as having to keep raising rates to deal with the inflation issue. In that outlet’s words:
The march projections also show officials expect inflation to be running at 4.3 percent by the end of the year, up from 2.6 percent expected in December. Core inflation, which excludes food and energy prices, is expected to rise 4.1 percent, up from 2.7 percent expected at the end of last year.
The projections also show that Fed officials expect its interest rate target will rise to 2.8 percent by the end of next year and stay that high in the following year, above the expected long-run rate of 2.4 percent. That is an indication that Fed officials think interest rates will have to remain high in order to overcome the inflationary pressures that have gripped the economy since early 2020. Read more