Fed goes big again with third-straight three-quarter-point rate hike

The Federal Reserve made history on Wednesday, approving a third consecutive 75-basis-point hike in an aggressive move to tackle the white-hot inflation that has been plaguing the US economy. The supersized hike, which was unfathomable by markets just months ago, takes the central bank's benchmark lending rate to a new target range of 3%-3.25%. That's the highest the fed funds rate has been since the global financial crisis in 2008. Wednesday's decision marks the Fed's toughest policy move since the 1980s to fight inflation. It will also likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for things like homes, cars, and credit cards.

Federal Reserve Chairman Jerome Powell acknowledged the economic pain this rapid tightening regime may cause. "No one knows whether this process will lead to a recession or, if so, how significant that recession would be," Powell said Wednesday afternoon in a press conference following the central bank's policy announcement, which came after a two-day monetary policymaking meeting. The Fed's updated Summary of Economic Projections, released Wednesday, reflects that pain: The quarterly report showed a less optimistic outlook for economic growth and the labor market, with the median unemployment rate inching up to 4.4% in 2023, higher than the 3.9% Fed officials projected in June and substantially higher than the current rate of 3.7%. US gross domestic product, the main measure of economic output, was revised down to 0.2% from 1.7% in June. That's well below analysts' estimates: Bank of America economists had estimated that GDP would be revised to 0.7%.