Powell Calls Fed’s 0.75% Rate Increase ‘Unusually Large,’ Warns of Slowing Economy

Central bankers predict elevated unemployment rates, prolonged higher prices and a slowdown in economic activity going forward


Jerome Powell, chair, Federal Reserve, Blockworks Exclusive Art by Axel Rangel


key takeaways

  • Fed officials opted to raise interest rates 0.75% and previews further hikes
  • All 18 meeting participants expect interest rates to hit at least 3% by the end of the year

The Federal Reserve announced a three-quarters of a percentage point increase in interest rates Wednesday, marking the sharpest rate hike since 1994. Central bankers also predict elevated unemployment rates, prolonged higher prices and a slowdown in economic activity. 

Overall economic activity appears to have picked up after edging down in the first quarter, Fed officials wrote in their statement released Wednesday at the end of their two-day policy meeting. Job gains have been robust in recent months, and the unemployment rate has remained low, the statement noted, but Russia’s invasion of Ukraine and ongoing supply chain issues have contributed to persistent inflation. 

“Inflation remains well above our longer run goal of 2% over the 12 months ending in April, total PCE prices rose 6.3%, excluding the volatile food and energy categories,” Fed Chair Jerome Powell said during a press conference following the release of the statement

Equities largely traded sideways following the release of the Federal Open Market Committee statement, with the S&P 500 losing 0.5% and the Nasdaq adding around 0.2%. 

“Markets loathe uncertainty and unpredictability,” Josh Olszewicz, head of research at Valkyrie Investments, said. “The 75 [basis points]-hike today represents both an acceleration of interest rates and potentially a higher target Fed fund rate between 2.75% and 3%.”

Bitcoin and ether extended their downward slide, in advance of the Fed announcement. 

“Digital assets have significantly correlated with US financial markets in recent months, both of which have continued to bleed lower,” Olszewicz said. “A decrease in downward volatility will only likely be achieved with a pause or reversal of the current Fed policy and direction.”

Central bankers expect the federal funds to end 2022 at 3.4%, up from their March estimate of 1.9%, the statement said. 

All 18 Fed officials who participated in the meeting expect the central bank to raise interest rates to 3% before the end of the year, economic projections from the meeting show. Members also lowered their gross domestic product expectations for 2022 from an expected 2% to 3.3% increase to a 1% to 2% increase.

Inflation has “surprised to the upside,” Powell, who long called the higher prices transitory, noted. 

Powell in May said central bankers expected to raise rates 50 basis points in June and July, before changing the narrative on Monday by signaling a 75 basis point increase. 

“When I offered that guidance at the last meeting, I did say that it was subject to the economy performing about in line with expectations,” Powell said. “By this point, we had actually been expecting to see clear signs of at least inflation flattening out and ideally beginning to decline.” 

Investors and consumers should not expect such large rate hikes going forward, but nothing is off the table, Powell said.

“Clearly, today’s 75 basis point increase is an unusually large one and I do not expect moves of this size to be common,” Powell said. “From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting, and will continue to communicate our thinking as clearly as we can.”

This is a developing story.

[stock_market_widget type=”accordion” template=”chart” color=”#5C37D2″ assets=”BTC-USD,ETH-USD,^GSPC,NDAQ” start_expanded=”true” display_currency_symbol=”true” api=”yf” chart_range=”1mo” chart_interval=”1d”]

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. What you can expect: And more! Don’t miss out on the opportunity to be in the room when the future of crypto is decided. Join us and help shape the future of our […]

recent research

Research report - cover graphics-2.jpg


Base has doubled-down on its commitment to the Superchain vision, has shown early signs of success with nearly $400M in TVL, and has become home to novel dapps such as friend.tech which has seen significant traction.


Blockchain is a “natural fit” in games based on open economies and user-generated content, says Wyatt


Their current stance is a half-baked attempt that could stifle innovation and burden an emerging industry


Maker’s DeFi-focused “subDAO” passed a proposal activating a lending market for DAI on the Gnosis Chain


Certain creditors could be repaid sooner, with one hedge fund exec telling Blockworks it expects a payout by the end of the year


Busan is South Korea’s second largest city with a population around 3.4 million


Cyprus granted eToro crypto registration, setting the groundwork for the company to operate crypto services post-MiCa rollout