The Fed Increased Rates—Now What?

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News Analysis With inflation running well above the Fed’s stated target, earlier this month the Fed made its first steps in an attempt to quell inflation, raising the federal funds rate by 25 basis points. A 25 basis point interest rate increase on its own is unlikely to make a dent in inflation. But the increase marks the first in what will likely be a series of rate rises. The Federal Open Market Committee’s (FOMC)—the body that makes the monetary policy decision—median projection is that the federal funds rate will be around 1.9 percent by the end of the year. And the tightening cycle will continue into 2023, with members projecting the rate being around 2.6 percent in 2023. Will It Be Enough? The Fed currently faces a challenge it hasn’t faced for decades—bringing inflation down. Pandemic-related supply bottlenecks and unprecedented fiscal and monetary support have sent inflation soaring. Personal …

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