The Fed’s 75 basis point increase is the most aggressive tightening since the 1980s

The Federal Open Market Committee (FOMC) raised its benchmark interest rate by 75 basis points to a range of 2.25% to 2.50% on Wednesday, in line with market expectations, bringing the cumulative increase in June and July to 150 basis points, the largest since Paul Volcker took the helm of the Fed in the early 1980s.
The FOMC statement said members voted unanimously 12-0 for the rate decision. Us inflation remains elevated, reflecting pandemic-related supply and demand imbalances, higher food and energy prices, and broader price pressures, the statement said. The Committee is highly concerned about inflation risks and is firmly committed to returning inflation to its 2 percent objective.
The statement reiterated that the FOMC “anticipates that further increases in the target range will be appropriate” and will adjust policy if risks threaten to impede achievement of the inflation target.
The Fed also warned that while job growth has been strong, recent measures of spending and production have softened.
The statement said balance-sheet reductions would be accelerated as planned in September, with the maximum monthly reduction for mortgage-backed securities rising to $35bn and for Treasuries to $60bn.
The Fed also reiterated the economic impact of the conflict, saying events related to the conflict were creating new upward pressure on inflation and weighing on global economic activity.
Faced with criticism that he was slow to respond to rising prices last year, Powell is struggling to rein in the hottest inflation in four decades, sending financial markets into turmoil and investors into fear that a Fed rate hike could trigger a recession.
Investors are now focused on whether the Fed will slow rate hikes at its next meeting in September, or whether strong upward price pressures will force the Fed to continue raising rates at an unusually aggressive pace. After the announcement, CME FedWatch showed that the probability of the Fed raising rates to 2.5% to 2.75% by September was 0%, 45.7% to 2.75% to 3.0%, 47.2% to 3.0% to 3.25%, and 7.1% to 3.25% to 3.5%.