Federal Reserve Chairman Jerome Powell and members of the Federal Open Markets Committee voted Wednesday to raise the benchmark interest rate by 75 basis points. File Photo by Tasos Katopodis/UPI | License Photo
Sept. 21 (UPI) -- The Federal Reserve raised its benchmark interest rate by 0.75 percentage points Wednesday in its latest move to fight the highest inflation in 40 years.
The highly anticipated move boosts the federal funds rate to the range of 3% to 3.25% after it remained near zero as recently as March.
The Federal Open Market Committee also announced it would continue reducing its holding of Treasury securities, agency debt and mortgage-backed securities. It has committed to continuing aggressive action to stem inflation, with a goal of returning it to 2% by 2025.
"We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses," Federal Reserve Chairman Jerome Powell said during a news conference. "Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy."
The Fed noted modest growth in spending, production and job gains in recent months along with low unemployment and pointed to higher energy costs and the Russian war in Ukraine as factors driving inflation.
"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the committee said in a news release.
"Russia's war against Ukraine is causing tremendous human and economic hardship."
After early gains Wednesday, stocks slid after the announcement but then bounced back into positive territory.
Some fear ongoing rate increases raise the risk of triggering a recession.
"It will be really important to see if Powell blesses the dots and another 75 bps in November," Peter Boockvar, chief investment officer for Bleakley Financial Group, said, according to CNN. "Either way, the Fed has entered the 'Danger Zone,' in terms of the rate shock they are throwing onto the U.S. economy."
Powell hinted at the increase earlier this month, saying the Fed would continue to act "forthrightly, strongly" to combat inflation.
It is the fourth straight increase, following a half-point hike in May and a pair of 0.75-point hikes in June and July.