Fed Raises Interest Rates by Half a Percentage Point
In an effort to fight inflation, the Federal Reserve yesterday raised its benchmark federal funds rate by half a percentage point — the largest rate hike in 22 years.
In an official statement, the Fed said: “The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions.”
The Fed also announced that as of June 1, it will begin reducing its holdings of U.S. Treasury securities and mortgage-backed securities at a rate of $30 billion per month and $17.5 billion per month until Sept. 1 when the monthly rate reduction will increase by $60 billion and $35 billion, respectively.
Rising interest rates are expected to increase the cost of all kinds of credit, from small business loans, auto loans, credit cards to home mortgages.
NAHB Chief Economist Robert Dietz provides more analysis in this Eye on Housing blog post.