The Fed raises interest rates by three-quarters of a percentage point in the boldest move since 1994

Biden: My priority is to fight inflation 1:18

(CNN) --

The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday in an aggressive move to tackle red-hot inflation that is plaguing the economy, frustrating consumers and stifling the Biden administration.

It's the biggest rate hike since 1994 and will affect millions of American businesses and households, raising the cost of home, car and other loans to force a slowdown in the economy.

Until this week, economists and investors expected the Fed to raise its benchmark interest rate by half a point, the second such move in the last 22 years.

However, after a disastrous inflation report on Friday revealed that price gains are widening across the economy, expectations for a more drastic rate hike rose.

Americans are struggling with rising costs from the grocery store to the pump for gasoline and the Fed is tasked with keeping prices steady.

Rising prices from food to gasoline, which hit a series of daily record highs in the past month, have led to the lowest consumer confidence since 1952.

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When the pandemic first hit the United States, the Federal Reserve implemented a series of emergency measures to support the economy, including cutting its interest rate to zero, which made borrowing money almost free.

But while that "easy money" policy encouraged household and business spending, it also fueled inflation and contributed to the overheating of today's economy.

Now that the economy no longer needs the Fed's support, the central bank has been taking steps to "eliminate the punch bowl" and slow the economy by aggressively raising interest rates.

The Fed's actions will raise the rate banks charge each other for overnight loans to between 1.5% and 1.75%, the highest since before the pandemic hit the United States.

The rate increase is not entirely unexpected: Some major banks, including Barclays, Jefferies, Goldman Sachs and JPMorgan, had expected the Fed to raise its rate by 75 basis points, or three-quarters of a percentage point.

The central bank's announcement came at the end of its two-day policymaking meeting.

Federal Reserve Chairman Jerome Powell will appear at a news conference at 2:30 p.m. ET, only the second time the Fed chief has addressed reporters in person since the pandemic gripped the United States. Joined.

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United States Federal Reserve