Fed tries to contain inflation in the US with a 0.75% increase in interest rates

  • The 75 basis point increase leaves interest rates in a range between 1.5% and 1.75%.
  • It is the largest increase in rates since 1994, with the aim of stimulating savings.

The fight against inflation continues to be the main strategy of the US financial authorities, after the Fed announced at a press conference that it increased its interest rate by 0.75%, or 75 basis points, to leave it in a range between 1, 5% and 1.75%. The objective of this increase in interest rates, which is part of a series of increases scheduled for this year, is to restrict access to credit, which aims to restrict consumption, as a measure to curb inflation.

In the announcement of the 0.5% increase on May 5, reported by ForexDominion, the president of the United States Federal Reserve, Jerome Powell, assured that “… an increase of 75 base points is not something that the Committee Federal Open Market (FOMC) is actively considering. However, with the high rates of inflation reported, this increase became effective this time, which represents the highest since 1994.

In addition to the record increase in rates, which make loans even more expensive, the Fed said in a press release that it will continue with the policy of periodic increases for the rest of the year. It also stated that it will carry out repurchase operations of bonds, which began to be issued in 2020, for USD 500,000 million.

Next increases in the interest rates are expected in 2022

In the press conference after the Fed’s announcement, Powell stated that increases of 0.75% will not necessarily be carried out in the following months, although they would be between 0.5% and 0.75%.

S&P 500 Price Chart June 15 2022
S&P 500 Price Chart. June 15 2022

At the time of writing, both stocks and the price of bitcoin are showing a slight rebound. The price of bitcoin has rebounded from USD 20,879 to USD 21,660 during the day, while the S&P and Nasdaq show increases of 1.44% and 2.15% respectively.

Inflation in the United States has been growing since the beginning of the year and reached a new record in four decades when it was announced that the increase in consumer prices for the month of May was 8.6%. This is the highest year-on-year inflation value since 1981, as reported by ForexDominion.

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