Fed begins inflation fight with key rate hike, more to come
ABC News
The Federal Reserve launched a high-risk effort to tame the worst inflation since the 1970s, raising its benchmark short-term interest rate and signaling potentially up to seven rate hikes this year
WASHINGTON -- The Federal Reserve launched a high-risk effort Wednesday to tame the worst inflation since the 1970s, raising its benchmark short-term interest rate and signaling potentially up to seven rate hikes this year.
The Fed's quarter-point hike in its key rate, which it had pinned near zero since the pandemic recession struck two years ago, marks the start of its effort to curb the high inflation that has followed the recovery from the recession. The rate hikes will eventually mean higher loan rates for many consumers and businesses.
The central bank's policymakers expect inflation to remain elevated and to end 2022 at 4.3%, according to updated quarterly projections they released Wednesday. That's far above the Fed's 2% annual target. The officials also now forecast much slower economic growth this year, of 2.8%, down from its 4% estimate in December.
Chair Jerome Powell is steering the Fed into a sharp U-turn. Officials had kept rates ultra-low to support growth and hiring during the recession and its aftermath. As recently as December, Fed officials had expected to raise rates just three times this year. Now, its projected seven hikes would raise its short-term rate to 1.875% at the end of 2022. It could increase rates by a half-point at future meetings.
