Chairman of the Federal Reserve Jerome Powell announced a 50 to 75 point increase in interest rates in the coming month during a press conference on Wednesday.
The new raise in interest rates would amount to a 1.5% to 1.75% raise, the largest hike in rates since 1994. This could raise mortgage rates, which are already up to around 6.28% from around 2% in 2020, all the way to over 7% in the next few weeks alone.
“We thought strong action was warranted at this meeting, and we delivered that,” the Fed Chairman declared.
Despite the large hike in rates, Powell did claim that they don’t plan to make sizable jumps like this common, still leaving room for another potential massive hike in the near future.
Powell said, “Clearly today’s 75 basis point increase is an unusually large one and I do not expect moves of this size to be common. From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting.”
He further hinted at increasing interest rates even further in upcoming months, adding, “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data.”
Powell’s interest rate hike is considered a last ditch effort to try and reign in historically high inflation of 8.6%. The chairman said the overarching goal is to get inflation back down to 2%, suggesting that a strong job market would be impossible to maintain without it.
Powell also claimed during his one hour long press conference that the massive spike in inflation and drop in retail sales don’t show any actual indications of a larger market dip. He echoed Biden’s unproven claims that the American people are well positioned for a potential recession.
While the increased rates are certain to affect things like housing, automobiles, and credit card purchases, most Americans simply want to get out of this horrible economic death spiral before it’s too late. Do you agree with Powell’s decision to hike the rates? Why do you think he took so long?