Inflation Reached The United States. The Fed Interest Rate Has Been Raised More Aggressively Than In The Last 28 Years

The US Federal Reserve has tightened monetary policy most aggressively in 28 years to slow inflation. The Monetary Committee (FOMC) raised the key interest rate by 75 basis points, reaching 1.50% to 1.75% on Wednesday. This is the sharpest increase in the key rate since 1994.

The Fed has also signaled that it will continue its monetary policy tightening cycle later this year, with interest rates rising sharper than expected. The reason is inflation, which accelerated in May and has now reached its highest level since December 1981.

Worse, than expected

The Fed currently expects the key rate to rise to 3.4% by the end of the year, which is 1.5 percentage points more than the March estimate. At the same time, the FOMC expects it to increase to 3.8% in 2023.

The Fed has also significantly worsened the outlook for the US economy this year. At present, it forecasts an increase in gross domestic product (GDP) by 1.7%. In March, they still predicted an expansion by 2.8%. The inflation forecast for this year rose to 5.2% from 4.3%. In 2023, the growth rate of consumer prices should slow to 2.6%.