Last June, the central bank also raised interest rates by 0.75 percent. The Fed has not raised interest rates this quickly since the early 1980s.
War in Ukraine
In a statement, the central bank said it was monitoring inflation very closely. Policymakers report that the war in Ukraine is fueling inflation and at the same time putting pressure on economic activity.
As a result, corporate and consumer spending has eased slightly, the central bank notes, but the labor market remains strong. The central bank thus indicates that there is room for another sharp hike.
According to the interest rate, the prime interest rate is 2.25 to 2.5 percent. Unlike the previous step, the increase was unanimous. At the time, not a single policymaker believed such a large increase was needed.
Subsequent rate hikes would be “appropriate,” according to the central bank, with central bankers closely watching inflation numbers.
Equity markets rarely react to rate hikes in line with expectations. The dollar fell slightly against the euro.
Later today, Federal Reserve Chairman Jerome Powell will comment on the interest rate decision.
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