The Federal Reserve raised interest rates seven times in 2022. The target range went from near zero to 4.25 to 4.50% by December.
That is 425 basis points in nine months. A basis point is one hundredth of a percentage point. This guide sets out what the Fed did at each meeting, measures the pace against earlier cycles, then shows what it was responding to. Every figure comes from the Federal Reserve's own releases or from the Bureau of Labor Statistics.
What were the Fed rate hikes in 2022? The Fed raised its target range for the Federal Funds Rate at seven of its eight scheduled meetings in 2022. The increases came to 425 basis points. The range ended the year at 4.25 to 4.50%.
Four of the seven increases were 75 basis points each. The Fed's tables back to 1990 record one other increase that large, in November 1994.
The cycle ran on into 2023. Four more increases took it to 5.25 to 5.50% in July 2023, 525 basis points in all.
The Effective Fed Funds Rate, the market rate itself, rose 4.50 percentage points over the best 12 months of the cycle. No 12-month stretch had risen further since one ending in September 1981.
What did the Fed do at each meeting in 2022?
The Fed does not set one interest rate. It sets a target range for the Federal Funds Rate, the rate at which banks lend to each other overnight. It then steers the market rate inside that range. That market rate is the Effective Fed Funds Rate, the average of what banks actually paid each day.
Source: Federal Reserve, open market operations and H.15 Selected Interest Rates; Federal Reserve Bank of New York reference rates; YX Insights
Chart 1 shows that range through 2022 as a band, with the Effective Fed Funds Rate running inside it. The market rate sat 8 basis points above the floor of the range on 249 of the 250 business days of the year.
Effective date | Change | New target range | Cumulative |
|---|---|---|---|
27 January | None | 0 to 0.25% | 0 |
17 March | 25 basis points | 0.25 to 0.50% | 25 |
5 May | 50 | 0.75 to 1.00% | 75 |
16 June | 75 | 1.50 to 1.75% | 150 |
28 July | 75 | 2.25 to 2.50% | 225 |
22 September | 75 | 3.00 to 3.25% | 300 |
3 November | 75 | 3.75 to 4.00% | 375 |
15 December | 50 | 4.25 to 4.50% | 425 |
Source: Federal Reserve, open market operations; YX Insights
The table gives every decision. The Fed publishes these by the date each change took effect, which is the day after the meeting ended.
January is the one meeting that made no change. The range stayed at 0 to 0.25%, where it had been since March 2020.
The sizes then rose and fell: 25 basis points in March, 50 in May, 75 at each of the next four meetings, then 50 in December. The four consecutive 75-point moves are the unusual part. The Fed's published tables, which begin in 1990, record one other increase that large, in November 1994.
Was 2022 the fastest modern hiking cycle?
On the Fed's published record of target changes, which begins in 1990, yes, by a wide margin.
Source: Federal Reserve, open market operations and its archive; YX Insights
Chart 2 divides each cycle's total increase by the months between its first and last move. It covers the five cycles on the Fed's published record, which begins in 1990. The 2022 increases came at 47.4 basis points a month. The next fastest is 1994 to 1995, at 25.2.
The 2004 to 2006 cycle reached the same 425 basis points. It took 24.0 months to do it, against 9.0.
Counting the whole cycle changes the answer very little. Including the four increases of 2023, which took the range to 5.25 to 5.50% that July, it is 525 basis points over 16.3 months, or 32.2 a month. That is still above every earlier cycle on this record.
How does 2022 compare with the early 1980s?
Reaching further back needs a different measure. Before 1990 the Fed did not publish a target range in this form. In the early 1980s it was steering by bank reserves instead.
What does run continuously is the Effective Fed Funds Rate, the market rate itself, which the Fed has published as a monthly average since July 1954.
Source: Federal Reserve, H.15 Selected Interest Rates, series RIFSPFF_N.M; YX Insights
Chart 3 plots that series for its whole history. The 2022 climb is steep and short. It is also dwarfed by what happened at the start of the 1980s.
Over the 12 months to July 1981 the rate rose 10.01 percentage points, from 9.03% to 19.04%. The best 12 months of the 2022 cycle, April 2022 to April 2023, rose 4.50 points, from 0.33% to 4.83%.
The last 12-month stretch to rise further than 2022 ended in September 1981. Measured by calendar year, December average to December average, 2022 is the third-largest rise since 1955, behind 1980 and 1973.
What was the Fed responding to?
Inflation, which was still climbing when the increases began.
The Consumer Price Index rose 7.87% in the year to February 2022, the last reading before the first increase. It kept climbing to a peak of 9.06% in the year to June 2022, then fell to 6.45% by December.
So the first increase did not come after inflation peaked. It came three months before.
The Fed's 2% goal is measured by the Personal Consumption Expenditures (PCE) Price Index, not by the Consumer Price Index quoted here. The two are different measures of the same thing and do not line up.
The January statement had already pointed that way. It described inflation as "well above 2 percent" and said the Committee "expects it will soon be appropriate to raise the target range for the federal funds rate".
The March statement, the first to raise rates, blamed "supply and demand imbalances related to the pandemic" along with higher energy prices and broader price pressures. It was also the first to mention Ukraine, saying the invasion was "likely to create additional upward pressure on inflation".
Rates were still below inflation when the year ended. The Effective Fed Funds Rate was 4.33% on 30 December 2022 against a Consumer Price Index running at 6.45%.
So 2022 brought the largest 12-month rise in the Effective Fed Funds Rate since 1981. It still ended the year with the Fed's rate below the rate at which prices were rising.
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Common questions about the 2022 Fed rate hikes
How many times did the Fed raise rates in 2022?
Seven times, at seven of its eight scheduled meetings. The January meeting held the range at 0 to 0.25%. The increases were 25 basis points in March, 50 in May, 75 in June, July, September and November, then 50 in December. That is 425 basis points in all.
How high did interest rates go in 2022?
The target range for the Federal Funds Rate ended 2022 at 4.25 to 4.50%. The Effective Fed Funds Rate, the market rate inside that range, was 4.33% on 30 December 2022. Rates rose further in 2023, reaching 5.25 to 5.50% in July.
Was 2022 the fastest rate rise in history?
No. On the Effective Fed Funds Rate, the 12 months to July 1981 saw a rise of 10.01 percentage points. The fastest 12 months of the 2022 cycle rose 4.50 points. What is true is that no 12-month stretch since one ending in September 1981 had risen as far as 2022's did.
Why did the Fed raise rates so fast in 2022?
Inflation. The Consumer Price Index was rising at 7.87% a year when the first increase was made in March 2022. It reached 9.06% in the year to June. The Fed's own statements cite "supply and demand imbalances related to the pandemic", higher energy prices and, from March, the war in Ukraine.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.