The US Federal Reserve System (FRS) raised the base rate by 0.75 percentage points to 1.5-1.75% per annum. This is stated on the website of the regulator. The last time the base rate band was raised was in November 1994.

The sharp increase in the Fed's rate is aimed at combating record inflation, the strength of which the regulator underestimated. In May, US inflation hit 8.6%, the highest since 1981.

Now Fed Chairman Jerome Powell is signaling to the market that the Fed is willing to sacrifice economic growth by making credit less accessible to fight rising prices. As a rule, such measures lead to a reduction in economic activity and consumption among the population, a decrease in demand slows down inflation, but negatively affects the economy: companies reduce investment programs, freeze or completely stop hiring new employees.

In parallel, the rate hike, coupled with the reduction in the Fed's balance sheet, which Powell spoke of, should lead to a reduction in the inflated bubble in the US stock market, which was formed as a result of a giant issue at the peak of the coronavirus pandemic.

The rise in the value of money also means an increase in unemployment – ​​according to the forecasts of US officials, it will rise from the current 3.7% to 4.1% by 2024.

The Fed's rate hike won't be the last, Jerome Powell said.

“Of course, today's rate hike by 75 b.p. is unusually sharp, and I do not think that such a pace of increase will become commonplace, - Powell said during a press conference following the Fed meeting that ended on Wednesday. - However, based on current considerations, the rate increase by 50 bp. or 75 bp at the July meeting seems the most likely," Powell added ( quoted by Interfax).

After the July hike, the rate level will be closer to the normal level, which will give the Fed management the opportunity to think about what should be the next steps, he said.