Fed hikes 75bps, biggest increase since 1994

The FOMC raised the federal funds target 75 bps to 1.50-1.75% on June 15 2022, the largest single hike since November 1994. The decision came after the June 10 CPI surprise prompted the Fed to abandon its previously signaled 50 bp plan, communicated through a weekend Wall Street Journal article that effectively removed the blackout constraint. The dot plot showed a median 2022 terminal rate of 3.4%, up from 1.9% in March.

Equities rallied on the decision despite the larger hike, recovering some of the pre-meeting selloff. The S&P 500 gained 1.46% and Nasdaq 100 gained 2.50%, the counterintuitive pattern of rallies following hawkish moves that characterized much of 2022. The 10Y yield actually fell 16 bps as the larger hike was seen as accelerating the Fed's path toward restrictive and thus shortening the cycle.

The 75 bp hike was repeated at every subsequent meeting through November 2022. By year-end the Fed had delivered 425 bps of tightening in nine months, one of the fastest cycles on record. The June 15 decision marked the Fed's concession that transitory inflation narratives had failed, requiring emergency-speed tightening to restore credibility.