Federal Reserve Raises Rates By 0.75%, Highest Since 1994

The US Federal Reserve's Open Market Committee decided to raise the federal funds interest rates by 0.75 basis points to 1.75%, as part of the tightening policy approach adopted by the US Central Bank to confront inflation rates that reached their highest levels in 40 years.

The committee’s decision, Wednesday, came in line with the expectations of the markets, which priced the increase at 0.75 points, as investment banks expected the Federal Reserve to raise interest rates by that amount, including “Barclays” and “Jeffreys LLC.”

Friday's better-than-expected inflation data pushed treasury yields to their highest in more than a decade as markets expect the federal funds rate to reach 4% by the middle of next year.

The Fed raised the interest rate last May by 0.5%, the largest in 22 years, while the increase it approved today is the third in a row, with a total of 1.5%.

The last minutes of the Fed's May meeting showed Market Committee members agreeing to two half-percentage-point increases in interest rates at the June and July meetings before turning to 0.25 percentage-point increases until it overcomes the "distress" of inflation.

The year-on-year increase in the US consumer price index unexpectedly accelerated to 8.6% in May, the highest level in 40 years.

Central banks around the world are tightening their monetary policy to combat the largest wave of inflation the world has witnessed in nearly half a century, as the European Central Bank (ECB) instructed its internal committees to create a new tool to combat unjustified jumps in bond yields in the euro area, in light of the pressures on markets on Background to a possible first rate hike in more than a decade.