The US Federal Reserve has raised interest rates by three-quarters of a percentage point in an aggressive move to tackle white-hot inflation that is plaguing the economy, frustrating consumers and stifling the Biden administration.
CNN reports that it's the largest rate hike since 1994, and will affect millions of American businesses and households, pushing up the cost of borrowing for homes, cars and other loans in order to force a slowdown in the economy.
Until this week, economists and investors had expected the Fed to raise its benchmark interest rate by half a point, the second such move in the last 22 years.
However, after a disastrous inflation report on Friday revealed that price hikes are broadening across the entire economy, expectations rose for a more dramatic rate hike.
In a post-meeting news conference, Federal Reserve Chairman Jerome Powell acknowledged that a three-quarter-point rate hike "is an unusually large one."
While Fed officials "do not expect moves of this size to be common," Powell said, he noted that the central bank would likely discuss raising rates by 75 basis points or just 50 basis points at its next meeting, on July 26-27.
The US stock market rallied after the announcement, with the Dow up more than 500 points as investors interpreted the central bank's actions as a solid commitment to bringing down inflation.
Americans are struggling with rising costs from the grocery store to the gas pump and the Fed is mandated with the task of keeping prices stable. Surging prices on everything from food to gas -- which has hit a series of daily record highs in the past month -- have led to the lowest consumer sentiment since 1952.
According to a statement released Wednesday by the Federal Open Market Committee, the voting arm of the central bank, 10 out of 11 voting members were in favor of the hike. One lone dissenter, Kansas City Fed President Esther George, voted for a half-percentage-point hike.
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