Research Brief: Financial Markets – June 2022

Fed executes steepest rate hike in decades. At its June 15 meeting, the Federal Open Market Committee (FOMC) raised the federal funds rate 75 basis points to a target range of 1.50 percent to 1.75 percent. This was the largest single increase since November 1994 and brings the total year-to-date advancement to 150 basis points. Additional rate hikes are anticipated through the rest of the year, likely lifting the year-end target range into the 3.50 percent zone for the first time since before the Global Financial Crisis. These actions are applying substantial upward pressure to short-term interest rates. To lift longer-term rates, the Fed has also initiated quantitative tightening. The central bank is reducing its balance sheet at a measured pace of $47.5 billion per month from June to August, before accelerating to $95 billion beginning in September. The plan could adjust if economic risks shift.

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