In addition to increasing their target for short-term interest rates to a range of between 1.5% and 1.75% Fed officials projected that their target rate will reach 3.4% late this year, far higher than the 1.9% they envisioned in March.
Why it matters: The Fed has shifted toward break-the-glass, emergency footing on inflation — but such abrupt rate hikes risk sending the economy into recession and markets plunging further.
For weeks, Fed officials had signaled that they would likely raise rates only half a percent at this meeting, a plan undone by a flurry of bad inflation data in recent days.
Between last Thursday’s close and Tuesday’s close, the S&P 500 fell 7% and the average rate on a 30 year-fixed rate mortgage rose nearly three-quarters of a percentage point as markets started to adjust for the possibility of the Fed’s aggressive move.
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