Powell calls the Fed's 0.75% interest rate hike unusually high and warns of a slowdown in the economy

Powell calls the Fed's 0.75% interest rate hike unusually high and warns of a slowdown in the economy

The Federal Reserve announced a rate hike of three-quarters of a percentage point on Wednesday, marking the largest rate increase since 1994. Central bankers also predict higher unemployment rates, continued higher prices and a slowdown in economic activity.

Overall economic activity appears to have recovered after a slight decline in the first quarter, Fed officials wrote in their statement released Wednesday at the end of their two-day policy meeting. Job gains have been robust in recent months and the unemployment rate has remained low, the statement said, but Russia's invasion of Ukraine and ongoing supply chain problems have contributed to persistent inflation.

"Inflation remains well above our long-term target of 2% in the 12 months through April, with PCE prices rising 6.3% overall, excluding the volatile food and energy categories," Fed Chair Jerome Powell said during a press conference following the release of the Statement.

Following the release of the Federal Open Market Committee's statement, stocks traded largely sideways, with the S&P 500 losing 0.5% and the Nasdaq gaining around 0.2%.

“Markets abhor uncertainty and unpredictability,” said Josh Olszewicz, head of research at Valkyrie Investments. “Today’s 75 basis point increase represents both an acceleration in interest rates and potentially a higher Fed interest rate target of between 2.75% and 3%.”

Bitcoin and Ether extended their downward move ahead of the Fed announcement.

“Digital assets have been highly correlated with U.S. financial markets in recent months, both of which have continued to bleed lower,” Olszewicz said. “A decline in downside volatility will likely only be achieved through a pause or reversal in current Fed policy and direction.”

Central bankers expect federal funding to be at 3.4% at the end of 2022, down from their March estimate of 1.9%, the statement said.

All 18 Fed officials who attended the meeting expect the central bank to raise interest rates to 3% before the end of the year Projections from the encounter show. Members also lowered their expectations for gross domestic product for 2022 to a rise of 1% to 2% from an expected increase of 2% to 3.3%.

This is a developing story.

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The Post, which calls Powell Calls Fed's 0.75% interest rate hike "unusually high," warns of slowing economy, is not financial advice.