On Wednesday, the Federal Reserve raised interest rates by 0.75%, the largest single jump since 1994.

Federal Reserve Hikes Interest Rates By 0.75% To Slow Inflation, Signal More To Come

On Wednesday, the Federal Reserve hikeds interest rates by 0.75%, the largest single jump since 1994.

The central bank signaled that further interest rate hikes will come this year, as the Fed leans on higher borrowing costs to slow demand and work to calm skyrocketing inflation.

“Overall economic activity appears to have picked up after edging down in the first quarter,” the policy-setting Federal Open Market Committee said in a statement, repeating its commitment to “ongoing increases.”

The Fed’s decision lifts short-term borrowing costs to a target range between 1.50% and 1.75%.

In economic projections released Wednesday, the median Fed policymaker expects to further raise interest rates to roughly 3.4% by the end of the year. That would suggest another 1.75% in total rate hikes, spread across the remaining four scheduled policy-setting meetings this year.

On Wednesday the central bank also downgraded expectations for the U.S. economy to grow by only 1.7% this year, compared to the 2.8% it had forecast in March, according to Fox News.

NAR Chief Economist Lawrence Yun said, “Today’s announcement by the Federal Reserve set a big increase in interest rates and means several more rounds of rate hikes are on the way in upcoming months. So far, the short-term fed funds rate that the Fed directly controls has risen by 175 basis points. But the 30-year fixed-rate mortgage has risen even more – by nearly 300 basis points. On the same $300,000 mortgage, the monthly payment has risen from $1265 in December to $1800 today. That’s painful and, consequently, will shrink the buyer pool. Home sales have recently been trending down towards 2019 figures. Sales could fall even further with some inventory sitting on the market for more than a month like in the pre-pandemic days. Pricing a listed home properly will, therefore, be the key to attracting buyers. In the meantime, rental demand will strengthen along with rents. Only when consumer price inflation tops out and starts to fall will mortgage rates stabilize or even decline a bit. That is why providing additional oil supplies will be critical in containing consumer prices and interest rates.”

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