BREAKING: The Federal Reserve said on Wednesday that it is raising its benchmark interest rate by three-quarters of a percentage point, the sharpest hike since 1994, as it seeks to combat the fiercest surge in U.S. inflation in four decades.
The Fed has rapidly shifted this year from propping up the economy during the pandemic to trying to choke off a surge in consumer prices, which have been rising at the fastest rate since the 1980s.amid a drop in U.S. exports and reduced federal spending. The Fed expects the nation's gross domestic product to expand 1.7% this year and in 2023 as higher interest rates act as a brake on economic activity.
Economic growth remains solid, with unemployment near a 50-year low of 3.6% and businesses continuing to hire. But the steepest inflation since 1981 is hitting households hard and causing consumer spending to shrink, with the government reporting that retail sales fell in May. The 0.3% decline, the first such drop since December, is a sign that high gas prices may be forcing consumers to spend less on other purchases.
Last week, a sentiment survey by the University of Michigan found that Americans' expectations for future inflation are rising, a worrisome sign for the Fed because expectations can become self-fulfilling.to reporters at 2:30 p.m., explaining his outlook for the U.S. economy.
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