The Federal Reserve announced that it’s raising interest rates by 0.75 percentage point, following its November 1-2 meeting, bumping the federal funds rate to a target range of 3.75% to 4%. It’s the fourth straight time the Federal Reserve has raised rates 75 basis points, as the central bank rapidly reduces liquidity to the financial markets to help tamp down high inflation.
The Fed’s decision comes as inflation rages in the U.S. economy at some of the highest annual rates in 40 years, reaching 8.2% in September following an 8.3% report in August. With the Fed hitting the brakes on an overheated economy, the main question for many market watchers is how much further will the Fed raise rates and whether these moves eventually spill over into a recession.
“A fourth consecutive rate hike of 0.75% — after going 28 years without one that large — speaks to the urgency of the Fed’s task,” says Greg McBride, CFA, Bankrate chief financial analyst. “They were late to acknowledge inflation, late to wind down stimulus, late to start raising rates, and late to ramp up rate hikes in a meaningful way. They’re still playing catch-up against inflation that continues to run near 40-year highs.”
