The Federal Reserve is set to raise interest rates by 0.75 percentage points for the second time in a row on Wednesday, as it doubles down on its aggressive approach to taming heightened inflation despite early signs the economy is beginning to cool.
At the end of its two-day policy meeting, the Federal Open Market Committee is expected to lift its benchmark policy rate to a new target range of 2.25 per cent to 2.50 per cent, in line with officials’ estimates of the long-run “neutral” rate. When inflation is running at 2 per cent, this policy setting is considered to neither stimulate nor restrict growth.
The decision, due at 2pm Eastern Time, extends a string of interest rate increases that began in March and have ratcheted up in size as the Fed’s battle to fight inflation has intensified. Following a half-point rate rise in May and the first 0.75 percentage point rise since 1994 last month, Wednesday’s adjustment is set to make this tightening cycle the most aggressive since 1981.