Fed Raises Interest for the First Time Since 2018

The Federal Reserve voted to raise interest rates on Wednesday, planning six more rate hikes by the end of the year. This is an attempt to escalate inflation control, the highest level in 40 years, and the most aggressive pace in more than 15 years.

The Fed will raise the federal funds rate by a quarter percentage in a range between 0.25% and 0.5%, which would be the first-rate increase since 2018. 

Authorities have indicated that they expect interest rates to rise to nearly 2% by the end of this year. This is slightly higher than it was when the pandemic cut interest rates to near-zero two years ago before it hit the US economy. The median of their projections shows that the percentage will increase to about 2.75% by the end of 2023, taking it to the highest since 2008.

The  Federal Open Market Committee, which sets the rate hike, approved the rate hike with an eight-to-one vote, and St. Louis Fed President James Bullard dissented in favour of a larger half-point increase.

The Fed's decision on Wednesday was a sharp reversal from just two years when it lowered the interest rates to near zero and launched a number of programs to stabilise the market and support the economy as covid 19 shut down large swaths of the economy. The pandemic caused a severe two-month recession in 2020.