The US Federal Reserve has increased its target for the benchmark federal funds rate by 75 basis points, to a range of 3.75% to 4%. This is the federal funds rate’s highest level since 2008.
The central bank also flagged the likelihood that further increases will be necessary in order to restore the inflation rate to 2% over time. However, the Federal Open Market Committee’s statement included a new sentence in which it said that it will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
The next chart plots central bank monetary tightening across a selection of advanced nations:
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