Fed Hikes Interest Rates by 0.75% in 2022, Slashes US GDP Growth Forecast
In 2022, the Federal Reserve raised interest rates by 75 basis points to combat inflation, while revising down the US GDP growth outlook and signaling rising unemployment ahead.
In a decisive move to tackle soaring inflation, the Federal Reserve increased its target interest rate by 75 basis points, equivalent to three-quarters of a percentage point, in 2022. This aggressive hike aims to cool down the economy, which is showing signs of slowing growth and rising unemployment.
According to the Fed's latest "dot plot" projections, the federal funds rate is expected to reach 3.4% by the end of the year. Inflation, measured by the Personal Consumption Expenditures (PCE) Price Index, is forecasted to settle at 5.2% by year-end.
Reflecting these challenges, the Fed has sharply reduced its GDP growth forecast for 2022 to 1.7%, down from an earlier estimate of 2.8%. Growth projections for 2023 and 2024 have also been lowered to under 2%, signaling a cautious outlook for the US economy.
Caleb Silver, Editor in Chief of Investopedia, notes, "The Fed's larger-than-expected rate increase and downward revisions to growth forecasts highlight its recognition that inflation pressures were underestimated and the economic recovery's resilience overestimated. Financial markets are still adjusting to this new economic reality and will likely face continued volatility."
Indicators Point to Economic Slowdown
Recent data underscores the cooling economy: the Commerce Department reported an unexpected decline in US retail sales in May, pointing to weaker consumer demand. Additionally, homebuilder sentiment has dropped to its lowest level in two years, reflecting diminished housing demand amid rising mortgage rates, with sentiment declining for six consecutive months.
Consumer confidence, as measured by the University of Michigan's index, has plummeted to historic lows, comparable to levels seen during the 1980 recession, driven by rapid inflation increases.
Discover the latest news and current events in Finance News as of 21-06-2022. The article titled " Fed Hikes Interest Rates by 0.75% in 2022, Slashes US GDP Growth Forecast " provides you with the most relevant and reliable information in the Finance News field. Each news piece is thoroughly analyzed to deliver valuable insights to our readers.
The information in " Fed Hikes Interest Rates by 0.75% in 2022, Slashes US GDP Growth Forecast " helps you make better-informed decisions within the Finance News category. Our news articles are continuously updated and adhere to journalistic standards.