US Fed Raises Interest Rate by 0.75%P... 3 Consecutive Giant Steps (Update 2)

by Cho Seulkina

Published 22 Sep.2022 03:08(KST)

[Asia Economy New York=Special Correspondent Joselgina] The U.S. central bank, the Federal Reserve (Fed), has implemented the so-called 'Giant Step' of raising the benchmark interest rate by 0.75 percentage points three consecutive times.

On the 21st (local time), the Fed announced after the Federal Open Market Committee (FOMC) regular meeting that it would raise the federal funds rate by 0.75 percentage points from the previous 2.25-2.50% to 3.0-3.25%. Despite high-intensity tightening, inflation has not easily subsided, leading to three consecutive Giant Steps.

As a result, the U.S. benchmark interest rate reached its highest level since January 2008. The Korea-U.S. interest rates, which had been equalized by the Bank of Korea's baby step, have reversed again. Since entering the rate hike cycle by raising rates by 0.25 percentage points in March, the Fed has continued its tightening path with increases of 0.5 percentage points in May, 0.75 percentage points in June, and 0.75 percentage points in July.

In particular, the Giant Step implemented this time was virtually anticipated as the August Consumer Price Index (CPI) released earlier exceeded expectations. Some even mentioned a 1 percentage point hike, but it was interpreted as being excluded due to concerns about the panic it could cause in the market.

The FOMC stated, "Events related to the Ukraine war are adding additional upward pressure on inflation and burdening the global economy. We are paying very close attention to inflation risks," and added, "We believe it is appropriate to continue raising the target range for the interest rate." They also emphasized, "We are strongly committed to returning inflation to the 2% target."

The Fed also revised its inflation forecast upward to 5.4% in the economic outlook released on the same day.