Federal Reserve Announces .75% Rate Hike

On June 15, 2022, the Federal Reserve hiked interest rates by three-quarters of a percentage in their most aggressive move since 1994 in an effort to control inflation. Over the past few weeks, the Federal Reserve was expected to push out a half percentage point increase as many believed that the economy was beginning to level out. Interest rate hikes make the prices of mortgages, auto loans, and borrowing money more expensive. But the belief is that raising interest rates cool off the economy, which allows the demand for goods and services to lower, bringing prices down.

In May, prices climbed 8.6 percent compared to the same time last year. Prices for energy, housing, and food have climbed at a faster pace in 40 years. The stock market fell as confidence in the Federal Reserve’s ability to control inflation is low. The S&P has lost 20 percent of value from gains made during the pandemic.

Consumer sentiment for June is the lowest it has been since the recession in 1980, according to a survey performed by the University of Michigan last week. Americans are already adjusting spending habits that may cause the surge in prices to worsen.

Federal Reserve Chair Jerome Powell stated, “Clearly today’s 75 basis point increase is an unusually large one and I do not expect moves of this size to be common.” He also added that the Federal Reserve expects that they will raise rates by another 50 or 75 percentage points in July.

For more information regarding the Federal Reserve hike please contact the professionals at The Center for Financial, Legal, and Tax Planning, Inc., at (618) 997-3436 for more information.